BoE model risk rule may drive real-time monitoring of AI
New rule requires banks to rerun performance tests on models that recalibrate dynamically.
New rules from the Bank of England (BoE) on model risk management could push banks towards much more intensive monitoring of artificial intelligence (AI) and other algorithms that dynamically recalibrate, experts say.
“Algos and AI continuously operate, so it’s necessary to ensure they behave as expected, and that puts lots of pressure on us,” says Karolos Korkas, head of algorithmic trading model risk at Nomura. “We might just need to move into more real-time monitoring.”
The BoE’s Prudential
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