The Bank for International Settlements (BIS), has urged Central Banks globally to integrate Artificial Intelligence (AI) into their operations, emphasizing its potential for profound impact.
The BIS, often referred to as the “Central Banks’ Central Bank” due to its pivotal role in coordinating and supporting global central banking operations, in its first comprehensive report on the use of AI in the financial sector, highlights the immense capabilities of advanced technology.
The organization noted that AI’s efficiency in processing and analyzing real-time data potentially revolutionizes the way central banks monitor economic indicators and predict inflation trends.
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Cecilia Skingsley, a prominent BIS official and former Swedish central banker, emphasized that while Al can significantly enhance analytical capabilities, it should not replace human judgment in interest rate decisions. She stressed the importance of human accountability in monetary policy, given the
profound impact of borrowing costs on society.
“We like to hold humans accountable,” Skingsley stated, highlighting the necessity of judgment in setting interest rates. “So I can’t really see a future where an Al will be setting (interest) rates.”
It is worth noting that the BIS is currently involved in eight AI projects aimed at improving various aspects of Central banking. The technology is poised to drastically reshaped labor markets, impacting productivity and economic growth.
While the BIS urges for the integration of AI in banking operations, it has cautioned on several risks associated with the advanced technology. These include, New types of cyber attacks and the amplification of existing risks such as herding behavior, bank runs, and financial asset fire sales. It further warns that the untested nature of AI models and their potential for errors or hallucinations underscore the need for cautious and responsible implementation.
Notably, the BIS call for Central banks to embrace AI reflects the growing recognition and impact of the transformative technology in the banking sector.
Check Out several Ways AI is Revolutionizing The Banking Sector
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As AI continues to evolve with New models rolled out, the integration into banking operations will enhance efficiency, while also maintaining human oversight in decision-making processes.