Risks around AI and algorithmic convergence are causing ‘regulatory gaps’

TECHNOLOGICAL transformation in the financial sector has taken root. According to a report by Nvidia, 91 per cent of financial services companies are either assessing artificial intelligence or already using it in production – from portfolio optimisation and fraud detection to generative AI workflows, such as report generation and investment research.

However, research and policy analysis of AI’s risks to the economy remain underexplored. There is growing sentiment among regulators about the need to get AI’s more diffuse role in global investments right.

As US Securities and Exchange Commission (SEC) chair Gary Gensler commented: “It is likely that regulatory gaps have emerged and may grow significantly with the greater adoption of deep learning in finance… (meaning that) deep learning is likely to increase systemic risks.” This should be of particular concern now with the increasing use of AI in finance.