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Transforming financial supervision with AI : insights from the EU
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Lorenzo MORETTI, Laura RINALDI and Pierre SCHLOSSER (eds), Digital finance in the EU : navigating new technological trends and the AI revolution, Florence : European University Institute, 2024, pp. 87-94
[Florence School of Banking and Finance]; EU Supervisory Digital Finance Academy (EU-SDFA)
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KIUHAN VASQUEZ, Samir Alejandro, Transforming financial supervision with AI : insights from the EU, in Lorenzo MORETTI, Laura RINALDI and Pierre SCHLOSSER (eds), Digital finance in the EU : navigating new technological trends and the AI revolution, Florence : European University Institute, 2024, pp. 87-94, [Florence School of Banking and Finance], EU Supervisory Digital Finance Academy (EU-SDFA) - https://hdl.handle.net/1814/77930
Abstract
The rapid advance and widespread adoption of AI technologies have been driven by the recent availability of vast unstructured data, significant increases in computing power and a surge in funding of innovative tech projects (Bahoo et al., 2024). Given the heavy reliance of the financial sector on big data and process automation, financial institutions have greatly benefited from these technological advances. Machine learning and deep learning models are applied to asset pricing, credit scoring and risk analysis, creating efficiencies and new business opportunities (CRS, 2024). The changes brought about by AI, particularly machine learning, are also impacting the way financial supervisors oversee the market conduct and prudential behaviour of financial firms, thus improving current supervisory technology (SupTech) tools. Supervisors are recognising the potential for AI to enhance compliance and safety while being vigilant about its possible misuse to circumvent regulations. The development of AI challenges supervisors to stay abreast of industry advances and offers them opportunities to deploy their resources more efficiently and effectively to fulfil their mandates (Wall, 2018).