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FRM Part II · FRM Exam Part II · The Financial Stability Implications of Artificial Intelligence

A bank wants to use a generative AI tool to draft summaries of regulatory filings for analysts. Which control best addresses the specific risk that the tool may produce plausible but false statements?

Requiring human review and verification of outputs against source documents best addresses hallucination risk, where generative AI produces plausible but incorrect content. Longer outputs, restricted users or removing logs do not improve accuracy, and removing logs weakens auditability.

  1. AIncrease the tool's output length to provide more context
  2. BRestrict use to senior management only
  3. CRequire human review and verification of outputs against source documentsCorrect
  4. DRemove logging to reduce data storage costs

Explanation

Hallucination risk is mitigated by human-in-the-loop validation against authoritative sources. Longer outputs may add more errors, limiting users does not fix accuracy, and removing logs reduces auditability and traceability.

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