The Financial Stability Board (FSB) released a paper on Nov. 14 addressing AI’s impact on financial services, highlighting both its benefits and potential risks.
FSB Calls for Oversight of AI
An international organization that oversees and provides recommendations for the global financial system, the Financial Stability Board (FSB), has released a paper that examines the potential risks and implications of artificial intelligence in financial services.
A document entitled “The Financial Stability Implications of Artificial Intelligence” was published by the FSB on November 14. Within the paper, the FSB investigated the potential impact of AI on the current financial systems and infrastructure on a global scale.
The FSB acknowledged the numerous advantages of AI, including the potential to improve regulatory compliance, personalize products, enhance operational efficiency, and provide sophisticated data analytics.
Nevertheless, the FSB is of the opinion that AI has the potential to “amplify” vulnerabilities in the financial sector.
Artificial intelligence (AI) has the potential to exacerbate vulnerabilities in the financial sector.
Some AI vulnerabilities are particularly noteworthy, as they have the potential to elevate systemic risks, according to the FSB. This encompasses cyber risks, market correlations and model risks, data integrity, and governance, as well as third-party dependencies and service provider concentration.
The FSB also acknowledged that harmful actors can employ generative AI to perpetrate fraud. The FSB composed the following:
“GenAI also increases the potential for financial fraud and disinformation in financial markets. Misaligned AI systems that are not calibrated to operate within legal, regulatory, and ethical boundaries can also engage in behaviour that harms financial stability.”
During the second quarter of 2024, AI deepfake crypto fraudsters increased their operations, according to a report released by software firm Gen Digital on Sept. 4.
Additionally, security professionals anticipate that deepfake schemes powered by AI will become increasingly intricate. A spokesperson for CertiK previously informed Cointelegraph that this could extend beyond audio and video.
Methods for reducing the hazards associated with artificial intelligence in the financial
The FSB proposed solutions in response to its findings, which included the identification of data and information deficiencies in the monitoring of AI developments in finance.
The FSB also stated that regulators may benefit from “intensifying their engagement” with the private sector. This encompasses academicians, developers, and service providers.
The FSB also stated that authorities must evaluate the effectiveness of current regulatory frameworks in addressing local and international vulnerabilities.
Furthermore, regulators must also evaluate methods to improve their supervisory and regulatory capabilities in order to supervise policy frameworks associated with the use of AI in finance.
