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

The FSB report notes that monitoring AI-related vulnerabilities is complicated by AI's rapid evolution. Which approach is most consistent with its recommendations for addressing this challenge?

The consistent approach is to regularly review and adapt monitoring methods and to cooperate across borders and sectors to share information. AI evolves quickly, so static indicators or narrow coverage, such as only self-declared users or technology firms, would miss emerging vulnerabilities in the financial system.

  1. AFix a static list of AI risk indicators for ten years to ensure comparability
  2. BRegularly review and adapt monitoring approaches, using cross-border and cross-sector cooperation to share informationCorrect
  3. CLimit monitoring to institutions that publicly announce AI use
  4. DRestrict monitoring to the largest technology firms outside the financial sector

Explanation

Because AI changes quickly, the FSB favors ongoing, adaptable monitoring and international and cross-sector cooperation. A static list becomes obsolete; relying on self-announcement or only on tech firms leaves major gaps in coverage of financial institutions' actual use.

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