The SEC head has expressed concern that the rush by Wall Street to deploy AI could result in a financial collapse.
According to Gary Gensler, reliance on models created by tech corporations could result in economic turmoil. Gensler stated that it was “nearly unavoidable” that AI will bring a financial crisis as early as the late 2020s or early 2030s.
He really believes that there will be a financial catastrophe in the future, and after it is over, people will exclaim, “Aha! We have depended on either a single data aggregator or a single model. It might be in the mortgage industry. He speculated that it may be in one of the equities market’s segments.
As a cross-regulatory problem, Gensler urged for AI legislation that covers both the underlying AI models created by tech companies and how they are exploited by Wall Street banks.
It’s challenging to address the issue of financial stability since most of the law focuses on individual institutions, such as banks, money market funds, brokers, and individual institutions; it’s just how we operate, he told.
And it’s a horizontal issue, meaning that a lot of different institutions can be using the same basic base model or data aggregator.
Since the public debut of ChatGPT last year, Wall Street banks have embraced generative AI with enthusiasm.
Last month, Morgan Stanley introduced an artificial intelligence (AI) assistant based on OpenAI’s GPT4 model to assist staff in accessing market data and receiving recommendations. Rival JPMorgan, however, is said to have submitted a patent for an AI model called “IndexGPT” that will aid traders in selecting the securities they should invest in.
While experimenting with the new technology, banks have also taken action against the use of ChatGPT; earlier this year, employees were not allowed to use the chatbot at work by Goldman Sachs, Deutsche Bank, or Bank of America.
