Banks and hedge funds that rely on artificial intelligence threaten to inject risks into the financial system that could exacerbate a future crisis, according to global regulators. The financial industry’s rush to adopt AI raises the potential that firms will become overly dependent on technologies that herd them toward the same view of risks and could “amplify financial shocks,” according to a study published on

Wednesday by the Financial Stability Board, a panel of regulators that includes the U.S. Federal Reserve and European Central Bank. “AI and machine learning applications show substantial promise if their specific risks are properly managed,” the FSB said in a report that called for additional monitoring and testing of robotic technologies designed to lessen human involvement. “Taken as a group, universal banks’ vulnerability to systemic shocks may grow if they increasingly depend on similar algorithms or data streams.” CONTINUE