FRM Part II · FRM Exam Part II · The Financial Stability Implications of Artificial Intelligence
A financial stability authority wants to monitor vulnerabilities from AI use in the financial sector. According to the FSB's November 2024 report on the financial stability implications of AI, which of the following is the most appropriate first step to address current data gaps?
The appropriate first step is to improve data collection and indicators on AI adoption and its dependencies, especially third-party providers. Authorities cannot assess vulnerabilities such as concentration or model correlation without visibility, and bans or reactive approaches would not address the underlying information gap.
- ABan financial institutions from using third-party AI models until a complete dataset exists
- BEnhance data collection and indicators on AI adoption and its dependencies, including reliance on third-party providersCorrect
- CRely solely on market prices of AI-related technology firms as a proxy for sector-wide vulnerability
- DDefer any monitoring until AI-related losses have actually occurred at systemic institutions
Explanation
The FSB highlights that monitoring AI-related vulnerabilities requires better data and indicators on adoption and dependencies, including third-party service provider concentration. Banning third-party models is not recommended as a first step. Market prices and waiting for losses are reactive and do not capture the build-up of vulnerabilities.
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