Bank of England’s Bailey says AI can help regulators to find the ‘smoking gun’

(Reuters) -Bank of England Governor Andrew Bailey said on Monday that he and other regulators who oversee the financial services industry should use artificial intelligence to help them spot problems among the firms that they supervise.

“I think we’ve all got to invest heavily in data and data science, and techniques,” Bailey said during a discussion about financial regulation organised by the London School of Economics.

He said central banks and other watchdogs gather up vast amounts of data but “none of us, I think, can put our hand on our heart to say that we’re sort of optimally using it all.”

“It also creates the danger for the authorities that you’ve got the evidence in the building and you haven’t been able to use it and it subsequently comes out that somewhere in your system was the smoking gun,” Bailey added. “That’s a recurring concern for all of us.”

Bailey used his appearance at the LSE to repeat his view that calls for a cutting back of regulation of the financial sector should not lead to a return to risky behaviour in the financial services industry that could put the broader economy at risk.

Bailey said in July he disagreed with Finance Minister Rachel Reeves’ description of regulation as a “boot on the neck of businesses” and he defended rules for the banking sector which are overseen by the BoE.

(Reporting William Schomberg and Muvija MEditing by Marguerita Choy)