According to a research report by Bank of America (BAC), the use of artificial intelligence (AI) technology has the potential to enhance banks’ efficiency. However, there are also risks associated with this technology that must be considered. The industry is highly regulated and accesses sensitive data, meaning that banks and supervisors must be comfortable with the risks that come with the institutionalization of AI.
One concern is security, as the democratization of AI has made it easier for threat actors to access client assets. This has been seen in the recent collapse of several US banks earlier this year, where technology and social media have likely sped up deposit withdrawals. Regulators may not have a clear antidote to this new reality, making it less obvious how they will respond.
Despite these concerns, most major banks are already using AI technology, albeit cautiously. If the technology can deliver tangible efficiencies for European banks and boost returns, it is likely to be recognized with more stable to higher credit ratings and secure spreads. However, Bank of America says that at this stage, the revenue upside from the use of AI technology is less tangible.