Bank of England considers AI inclusion in bank stress tests, says deputy governor

The Bank of England is considering including the use of artificial intelligence in its annual stress tests for banks. Deputy Governor Sarah Breeden highlighted the rapid growth of AI in finance, with 75% of firms now using it, up from 53% two years ago. Breeden expressed concerns about AI's potential to increase market volatility, especially in trading. The central bank plans to form an "AI consortium" with private sector experts to study these risks and how AI models interact during crises. While many AI applications in finance are low-risk, significant uses, such as credit risk assessment and algorithmic trading, are emerging. Breeden noted that half of AI applications involve some level of automated decision-making, raising challenges for management and oversight.