Imagine the day when BoB — the Bank of England bot — comes to life, the artificial intelligence engine designed to keep us safe from the evils of the financial system.
The Bank is already thinking about BoB — Star Trek style. In the words of its chief economist Andy Haldane in 2014, such a system will allow the regulator to track
“…the global flow of funds in close to real time (from a Star Trek chair, using a bank of monitors), in much the same way as happens with global weather systems and global internet traffic. Its centrepiece would be a global map of financial flows…”
BoB is the future artificial (AI) engine who commands a complete description of the British financial system. BoB will be able to take all the data and contracts and use that to figure out all the contingencies, identify fragilities, inefficiencies and systemic risk.
Suppose further that other major financial centres also develop their version of BoB and all the AIs are friendly and cooperative. The financial institutions will also have their AI, talking to each other and the authorities.
Is that a pie-in-the-sky futuristic vision, doomed to failure like the flying cars of the 1970s? No. While BoB does not exist yet, the technology to create him exists.
What gets in the way is all the legal, political and social issues.
So what will happen?
BoB will have an easy time taking over much of day-to-day risk management and -micro-prudential supervision. A lot of money will be saved, many jobs lost and efficiency improved.
But BoB will increase systemic risk.
To be continued.
And discussed in our May 16th 2019 conference Technology in Finance, Law and Regulation.