Artificial Intelligence and Bank Soundness: Between the Devil and the Deep Blue Sea- Part 2

Charmele Ayadurai, Sina Joneidy

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

Banks have experienced chronic weaknesses as well as frequent crisis over the years. As bank failures are costly and affect global economies, banks are constantly under intense scrutiny by regulators. This makes banks the most highly regulated industry in the world today. As banks grow into the 21st century framework, banks are in need to embrace Artificial Intelligence (AI) to not only to provide personalized world class service to its large database of customers but most importantly to survive. The chapter provides a taxonomy of bank soundness in the face of AI through the lens of CAMELS where C (Capital), A(Asset), M(Management), E(Earnings), L(Liquidity), S(Sensitivity). The taxonomy partitions challenges from the main strand of CAMELS into distinct categories of AI into 1(C), 4(A), 17(M), 8 (E), 1(L), 2(S) categories that banks and regulatory teams need to consider in evaluating AI use in banks. Although AI offers numerous opportunities to enable banks to operate more efficiently and effectively, at the same time banks also need to give assurance that AI ‘do no harm’ to stakeholders. Posing many unresolved questions, it seems that banks are trapped between the devil and the deep blue sea for now.
Original languageEnglish
Title of host publicationOperations Management - Emerging Trend in the Digital Era
EditorsAntonella Petrillo, Fabio De Felice, Germano Lambert-Torres, Erik Bonaldi
PublisherIntechOpen publisher
ISBN (Electronic)9781838812034
ISBN (Print)9781838811877
DOIs
Publication statusPublished - 3 Feb 2021

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