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

A regional bank's risk committee reviews how financial institutions are currently using artificial intelligence. According to the FSB's assessment of AI and financial stability, which category of use is generally the most established and widespread among financial institutions at present?

Internal operational efficiency and support uses, such as process automation, customer support and compliance, are the most established AI applications in finance. Institutions are cautious about autonomous trading or replacing regulatory models because of governance, explainability and model risk concerns.

  1. AInternal operational efficiency and support functions, such as process automation and customer supportCorrect
  2. BFully autonomous trading of the bank's proprietary book without human oversight
  3. CAutomated setting of monetary policy rates for the central bank
  4. DDirect replacement of regulatory capital models with generative AI outputs

Explanation

The FSB notes that adoption is most advanced in internal operations, such as customer support, process automation, and regulatory compliance, and in risk management and fraud detection. Fully autonomous trading and replacing capital models are not the prevailing uses, and central bank rate setting is not a financial institution use case.

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