Generative Artificial Intelligence in Finance: Risk Considerations

Author: Mr. Ghiath Shabsigh and El Bachir Boukherouaa

The wide-ranging appeal of GenAI technology combined with its complex risks will have broad systemic implications for the financial sector. This note seeks to explore the potential risks to the financial sector from this technology based on its current technical characteristics.

Volume/Issue: Volume 2023 Issue 006

Publication date: August 2023

ISBN: 9798400251092

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Topics covered in this book

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Economics- Macroeconomics , Economics / General , artificial intelligence , embedded bias , cybersecurity , fintech , financial risks , financial sector policy and analysis , financial stability , generative , hallucination , machine learning , privacy , synthetic data , sample generative AI application , AI-machine learning , IMF Library , IMF Fintech Note 2023/006 , generative artificial intelligence in finance , Financial sector , Global

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Summary

In recent years, technological advances and competitive pressures have fueled rapid adoption of artificial intelligence (AI) in the financial sector, and this adoption is set to accelerate with the recent emergence of generative AI (GenAI). GenAI is a significant leap forward in AI technology that enhances its utility for financial institutions that have been quick at adapting it to a broad range of applications. However, there are risks inherent in the AI technology and its application in the financial sector, including embedded bias, privacy concerns, outcome opaqueness, performance robustness, unique cyberthreats, and the potential for creating new sources and transmission channels of systemic risks. GenAI could aggravate some of these risks and bring about new types or risks as well, including for financial sector stability. This paper provides early insights into GenAI’s inherent risks and their potential impact on the financial sector.