How financial authorities best respond to AI challenges

Artificial intelligence is transforming finance faster than the authorities can adapt. This column argues that while AI enhances the financial system’s efficiency, it also poses new, poorly understood risks. To stay relevant, the supervisory authorities must develop their own AI capabilities, use federated learning for cross-jurisdiction models, and design intervention facilities that can respond at machine speed. If they cannot keep pace, the consequences will be ineffective supervision and a higher risk of financial crisis.