The Era of AI: The Impact of Artificial Intelligence (AI) and Machine Learning (ML) on Financial Stability in the Banking Sector

Abstract

The impact of artificial intelligence and machine learning on financial stability: a socio-legal analysis of the banking sector. The purpose of the present analysis is to identify the impact of artificial intelligence and machine learning on financial stability in the banking sector. The methodology uses the socio-legal model and the technological approach. At the same time, a SWOT analysis is deployed to identify the strengths, weaknesses, opportunities, and threats that artificial intelligence and machine learning carry for the banking industry. The findings suggest a profound potential that these technologies must increase the efficiency, accuracy, and client experience in banking while at the same time providing significant challenges, such as dis-crimination, bias, loss of privacy, and weaker cybersecurity within the sector. Thus, the central message of the analysis is that the future progress of the banking sector with the help of artificial intelligence and machine learning can be achieved if a multi-stakeholder approach that takes full measure of the benefits and risks at the same time is to be implemented. The impact of the analysis is practical – it is a guideline for the policies that will help to implement the development. Meanwhile, the recommendations in terms of the regulatory environment and development of digital literacy and culture can be implemented in the near future. It also affects the academic and theoretical fields, providing an analysis of the question that can be an excellent background for further theoretical developments and policies.