Banks’ AI models are flawed – Basel Committee chair

Pablo Hernández de Cos says risk of AI model misspecification is “incredibly high”

Pablo Hernández de Cos
Pablo Hernández de Cos
Banco de España

The chair of the Basel Committee on Banking Supervision said flaws in artificial intelligence models could amplify instability in financial markets, in remarks on April 17.

Pablo Hernández de Cos said the use of AI models “can exacerbate the self-reinforcing features of the financial cycle”.

“These models rely heavily on historical patterns and fail to capture human behavioural dynamics in times of stress,” Hernández de Cos told the Institute of International Finance. He added that AI models “may

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