Increased widespread adoption of artificial intelligence (AI) could bring systemic risk to the UK financial system, according to a stark warning from the Bank of England (BOE).
According to the BOE, although AI will be able to deliver positive benefits to UK financial services, the importance of regulation to handle its potential dangers remains paramount.
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In a financial policy committee report from November 21, which was released on Wednesday (6 Nov), the BOE claimed that AI and machine learning “needed careful monitoring and consideration”.
The report stated that the committee would be working with relevant authorities to make sure the UK is resilient to the risks posed by AI.
According to the BOE, financial firms are currently testing and using low-risk AI models but notes this may change as the technology becomes more commonplace.
The BOE claims that most financial firms are using large language models to retrieve information, a lower-risk use than automating business operations or decisions.
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By GlobalDataIn 2022, a BOE survey found that 72% of firms reported that they are using or developing machine learning (ML) applications. The BOE claimed, at the time, that “these applications are becoming increasingly widespread across more business areas.”
The BOE said that ML applications are set to increase 3.5 times over the next three years, with the largest expected in the insurance sector.
Beyza Karakoy, analyst at research company GlobalData, said that financial institutions have been leveraging AI to develop customised products and tailor services to customers.
In a blog post for the research company, Karakoy wrote: “Banks and insurers alike have been adopting virtual assistants to provide personalised guidance to their customers, improving their customer relationships while streamlining their operations.
In September, AccountsIQ, an accountancy SaaS provider, found that almost a quarter (23%) of senior finance professionals fear that AI could put them out of a job.
The research also found that 24% of finance functions were already underway with onboarding the new technology and 51% were planning to in the next 12 months.
