👉👉👉 Central banks are adopting #AI despite inherent risks
A recent study by the Bank for International Settlements (BIS) has delved into the use of artificial intelligence (AI) tools by central banks, cautioning regulators about the inherent risks associated with this emerging technology.
The nine-page report, titled "Artificial intelligence in central banking," focuses on the application and potential risks of large language models (LLMs) by global central banks. Describing central banks as early adopters, the report discusses their reliance on AI models for information collection, leveraging machine learning techniques for tasks such as data sampling, cleaning, and matching information to existing sources.
Central banks are increasingly turning to AI-backed financial analysis to inform decisions on monetary policy. Neural networks and random forest models are utilized to access real-time data for inflation expectations and gather feedback on the effectiveness of monetary policy through the analysis of social media posts.
The use cases also extend to regulatory functions, with AI systems overseeing and supervising payment systems. These systems have proven effective in identifying irregular financial transactions, addressing concerns related to money laundering and cyberattacks.
The report highlights specific examples, such as the Central Bank of Brazil's deployment of ADAM, a classification model predicting borrowers likely to default on loans. Other regulators use AI systems to anticipate consumer behaviors in response to the introduction of a central bank digital currency (#CBDC ).
The report emphasizes AI's inherent risks, such as biased outputs from training data and challenges like hallucination. Short-term solutions involve central banks training staff in AI, but competition for skilled personnel with private firms is expected. To address challenges, the report recommends integrating an enterprise #blockchain system to ensure data quality, ownership, and immutability.
Source - coingeek.com
