ZURICH - Dangers to financial stability posed by the development of artificial intelligence (AI) tools are already starting to become a worry, two central bank chiefs told a conference on May 8.
Asked if there is “something bad that could happen that you are preparing for” related to the technology, the policymakers from two Asian banking hubs each highlighted possible risks that they have identified.
“It’s likely that there will be dominant AI firms, dominant cloud computing firms, that financial institutions are increasingly becoming reliant upon,” said Mr Eddie Yue, chief executive officer of the Hong Kong Monetary Authority (HKMA). “If they have a failure, then there could be systemic risks – at least systemic operational risks.”
He and his co-participant both identified misuse of the technology as a possible threat. They spoke at the Innovation Summit of the Basel-based Bank for International Settlements (BIS).
“For me, the main risk is AI in the wrong hands, and apart from scams and fraud, I would add cyber attacks as a key area of concern,” said Monetary Authority of Singapore managing director Chia Der Jiun. “AI has the potential to turbocharge these capabilities for cyber attacks” and “to democratise access to malware”.
While the global economy is expected to get a boost from spreading AI, the technology has so far mainly attracted sceptical looks from central bankers and financial regulators.
US and British officials have flagged, among other concerns, that so-called “black box” algorithms whose output cannot be easily predicted could discriminate against certain borrowers if used in bank lending.
Computer-made credit decisions can also exhaust the bandwidth of human administrators at banks, resulting in a trove of risky loans and a potential crisis, the Reserve Bank of India has warned. In addition, criminals can use the new technology against monetary institutions, like when a deepfake video showed Romania’s central bank governor touting fraudulent investments.
Mr Chia and Mr Yue each had plenty else to say on the dangers too, not least in fragile situations for financial stability.
“When malicious actors are using GenAI (generative AI) for either fraud scams or false content, false rumours, especially when there’s market stress, when people’s confidence is low, all these false rumours in the social media that look real might aggravate a bad situation into a very systemic one,” Mr Yue said.
But both governors also highlighted productive uses of AI. For example, it is helpful for catching sentiments prevailing in social media, according to Mr Chia.
The MAS chief added that computer models offer “a very, very important” input for the work of rate setters.
That view chimes with the stance of Germany’s Bundesbank president Joachim Nagel, who recently suggested a future use in better predicting inflation. This way, the technology could find “its way into the heart of monetary policy”, he said in a video in April.
Both central bankers at the BIS acknowledged that AI is an “opportunity”, though with qualifications.
“We’re not talking about a doomsday scenario where AI screws the world and destroys earth or something like that,” said Mr Yue. “But there are risks that we are already starting to see.” BLOOMBERG
