The BIS emphasizes the urgent need for central banks to enhance their AI capabilities to harness its benefits and mitigate risks within the financial system.
Main Points:
- Urgency for AI Adoption: Central banks must improve AI utilization to keep up with its transformative impact on the economy and financial systems.
- Benefits and Risks: AI can enhance productivity and financial monitoring but poses risks such as data manipulation and financial instability.
- Global Initiatives: Central banks, including the Federal Reserve and Bank of England, are exploring AI applications cautiously.
Summary:
The Bank for International Settlements (BIS) has urged central banks to “raise their game” in adopting artificial intelligence (AI) technologies to manage its transformative effects on the global economy and financial systems. The BIS report highlights the significant productivity benefits AI can offer, citing examples like Ant Group’s enhanced coding efficiency. However, it also warns of potential risks, including incorrect information, vulnerability to hacking, and systemic risks from widespread AI use in financial institutions.
Central banks are exploring AI applications cautiously. The US Federal Reserve is considering AI for operational purposes, while the Bank of England uses it to predict economic growth and financial stability. The European Central Bank has adopted AI for various tasks, such as drafting briefings and detecting financial risks. The BIS underscores that AI can improve “nowcasting” systems and detect money laundering but warns of risks like data poisoning, privacy concerns, and market volatility. To address these challenges, central banks must upgrade their AI capabilities both as observers and users of this technology.
Source: Central banks urged to keep pace with ‘game changer’ AI
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