Artificial Intelligence and Systemic Risk
26 Pages Posted: 28 Jun 2019 Last revised: 17 Aug 2021
Date Written: May 28, 2021
Artificial intelligence (AI) is rapidly changing how the financial system is operated, taking over core functions for both cost savings and operational efficiency reasons. AI will assist both risk managers and the financial authorities. However, it can destabilize the financial system, creating new tail risks and amplifying existing ones due to procyclicality, unknown-unknowns, the need for trust, and optimization against the system.
Keywords: Artificial intelligence, systemic risk
JEL Classification: G00, G38, G21
Suggested Citation: Suggested Citation