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ECB Believes Additional Regulations May Be Necessary For Usage Of AI In Finance

ECB Believes Additional Regulations May Be Necessary For Usage Of AI In Finance
The European Central Bank stated on Wednesday that although artificial intelligence (AI) in banking is still in its infancy, it has to be watched over and perhaps regulated to protect consumers and guarantee the smooth operation of markets.
The European Central Bank (ECB) observed that banks and other financial institutions might benefit from using generative AI in a variety of ways, including better information processing, more effective customer support, and even an increased capacity to identify cyberthreats.
However, it also issued a warning about potential dangers such as herd mentality, an excessive dependence on a small number of suppliers, and more potent cyberattacks.
In a piece released as part of its routine Financial Stability Review, the ECB stated that "the implementation of AI across the financial system needs to be closely monitored as the technology evolves."
"Additionally, regulatory initiatives may need to be considered if market failures become apparent that cannot be tackled by the current prudential framework."
The world's first artificial intelligence regulations were created by the European Union, and they will compel high-risk, general-purpose AI systems to abide with EU copyright laws and certain transparency requirements.
However, the European Central Bank (ECB) stated that European financial businesses were "in the early stages" of adopting such systems.
"Market contacts indicate that euro area financial institutions may be slower to adopt generative AI, given the range of previously discussed risks (and) also considering potential reputational risks," the ECB said.

Christopher J. Mitchell

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