Daily Management Review

SEC chief warns of risks to financial systems due to AI


The growth of artificial intelligence will require authorities to alter regulations in order to ensure financial stability, according to the SEC chairman.

According to Gary Gensler, chairman of the U.S. Securities and Exchange Commission (SEC), governments will need to update the financial system's regulations in order to retain its overall stability,  Bloomberg reports.

"Artificial intelligence (AI) can foster herd behavior, whereby different market participants do the same actions as a result of receiving the same signals from an underlying model or data aggregator," said Gensler.

He stated that regulators must address the problems posed by developing technologies, and the SEC staff is determining whether additional regulations are required. Model risk management rules must be revised, but Gensler added that this won't be sufficient because the majority of them date back to the rise of artificial intelligence.

source: bloomberg.com