Template-Type: ReDIF-Paper 1.0
Author-Name: Iñaki Aldasoro
Author-X-Name-First: Iñaki
Author-X-Name-Last: Aldasoro
Author-Name: Leonardo Gambacorta
Author-X-Name-First: Leonardo
Author-X-Name-Last: Gambacorta
Author-Name: Anton Korinek
Author-X-Name-First: Anton
Author-X-Name-Last: Korinek
Author-Name: Vatsala Shreeti
Author-X-Name-First: Vatsala
Author-X-Name-Last: Shreeti
Author-Name: Merlin Stein
Author-X-Name-First: Merlin
Author-X-Name-Last: Stein
Title: Intelligent financial system: how AI is transforming finance
Abstract: At the core of the financial system is the processing and aggregation of vast amounts of information into price signals that coordinate participants in the economy. Throughout history, advances in information processing, from simple bookkeeping to artificial intelligence (AI), have transformed the financial sector. We use this framing to analyse how generative AI (GenAI) and emerging AI agents as well as, more speculatively, artificial general intelligence will impact finance. We focus on four functions of the financial system: financial intermediation, insurance, asset management and payments. We also assess the implications of advances in AI for financial stability and prudential policy. Moreover, we investigate potential spillover effects of AI on the real economy, examining both an optimistic and a disruptive AI scenario. To address the transformative impact of advances in AI on the financial system, we propose a framework for upgrading financial regulation based on well-established general principles for AI governance.
Creation-Date: 2024-06
File-URL: https://www.bis.org/publ/work1194.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1194.htm
File-Format: text/html
Number: 1194
Keywords: artificial intelligence, generative AI, AI agents, financial system, financial institutions
Classification-JEL: E31, J24, O33, O40
Handle: RePEc:bis:biswps:1194