How AI can undermine financial stability
AI Systemic risk Regulations
As artificial intelligence makes inroads into the financial system, it exacerbates existing channels of instability and creates new ones. This column identifies several such channels, malicious and misinformed use, misalignment and the evasion of control, and finally risk monoculture and oligopolies. All arise when AI vulnerabilities interact with economic fragilities like strategic complementarities, problems of incentives, and incomplete contracts.