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Jaspal Singh

15 May 2024
Financial Stability Review Issue 1, 2024
The emergence of generative artificial intelligence (AI) tools represents a significant technological leap forward, with the potential to have a substantial impact on the financial system. Conceptually, AI brings both benefits and risks to the financial system. Practically, the overall impact will depend on how the challenges related to data, model development and deployment are addressed – both at the level of financial institutions and for the financial system as a whole. If new AI tools are used widely in the financial system and AI suppliers are concentrated, operational risk (including cyber risk), market concentration and too-big-to-fail externalities may increase. Furthermore, widespread AI adoption may harbour the potential for increased herding behaviour and market correlation. Should concerns arise that cannot be tackled by the current regulatory framework, targeted initiatives may need to be considered.
JEL Code
G01 : Financial Economics→General→Financial Crises
G10 : Financial Economics→General Financial Markets→General
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G20 : Financial Economics→Financial Institutions and Services→General
G41 : Financial Economics