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Bank of England: AI Could Threaten UK Financial System

Bank of England

England’s central bank says AI may pose a risk to the country’s financial system.

Bank of England Governor Andrew Bailey said Wednesday (Dec. 6) that banks and investors need to grasp the potential artificial intelligence (AI) has to improve productivity, as well as the risks that could come from transforming the nature of work.

“It’s not out of control in the sense of sort of ‘2001 A Space Odyssey’,” said Bailey, referencing the 1968 Stanley Kubrick film about a space voyage threatened by a rogue AI.

“It’s so complicated in many of its forms that understanding exactly what the black box delivers can be very hard,” added Bailey, whose comments were reported by Bloomberg News.

The governor spoke at a news conference at which the Bank of England (BOE) released a report on AI risks. That report says AI and machine learning could benefit the financial system, but adds that regulation should make sure that companies have proper oversight and control of the potential risks.

Bloomberg quotes a record of a Financial Policy Committee that says the impact of AI and machine learning on financial stability “needed careful monitoring and consideration.” The committee says it plans to work with “other relevant authorities” to make sure Great Britain’s financial system can withstand the dangers.

PYMNTS has examined the potential impact of AI on work several times this year, including in a September interview with Heather Bellini, president and chief financial officer at InvestCloud.

“AI is going to be an imperative for every company, and what you do with AI is what will differentiate your products,” she said.  “Functionally, it might get rid of a lot of the manual work people don’t want to do anyway and extract them up to a level where they can do more things that have a direct impact on the business.”

Earlier this year, the U.K.’s competition regulator released a report contending that AI can have a positive impact — when managed correctly.

“There is real potential for this technology to turbo charge productivity and make millions of everyday tasks easier — but we can’t take a positive future for granted,” Sarah Cardell, chief executive officer of the Competition and Markets Authority (CMA), said in September.

The CMA argues that the rapid development of AI foundational models across applications like ChatGPT highlights their potential to alter how people work and live, and to transform a variety of industries.

However, Cardell said, there is still “a real risk that the use of AI develops in a way that undermines consumer trust or is dominated by a few players who exert market power that prevents the full benefits being felt across the economy.”