Risk of robots to financial markets must be monitored - global watchdog

A group of experts led by Bank of England governor Mark Carney that's collectively responsible for ensuring the stability of global financial markets has said artificial intelligence (AI) must be monitored in the coming years.

The Financial Stability Board (FSB) said the growing adoption of AI and machine learning technology across the financial industry, from hedge funds to brokers to banks, for things like pricing insurance contracts, assessing credit and fraud detection is something that should be kept an eye on.

In a newly published report, the FSB noted several pros and cons of the technology.

Benefits included a more efficient financial system as a result of processing information more quickly, such as credit decisions and customer interactions as well as improving regulatory compliance. And AI could create "new and unexpected forms of interconnectedness", for example, by tapping institutions' previously unrelated data sources.

But it could also create a growing dependence on a third party that is outside of current regulation and a lack of "interpretability or auditability" of AI methods could create macro-level risks and unintended consequences.

"As with any new product or service, it will be important to assess uses of AI and machine learning in view of their risks, including adherence to relevant protocols on data privacy, conduct risks, and cybersecurity," said the report.

"Adequate testing and ‘training’ of tools with unbiased data and feedback mechanisms is important to ensure applications do what they are intended to do."

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