Financial Regulation in the Era of Artificial Intelligence

Abstract: A strong financial nation should embody three key characteristics: efficiency, stability, and international influence. The current features of China's financial system include "large scale, extensive regulation, weak supervision, and bank dominance," which lead to issues such as inadequate support for the real economy, numerous financial risks, and the need for enhanced regulatory capabilities. Financial regulatory policies must strike a dynamic balance between efficiency and stability, ensuring coordination to better support the real economy while also mitigating systemic risks. When applied correctly, artificial intelligence can simultaneously enhance both the quality of financial services and the effectiveness of risk management.

The use of artificial intelligence in the financial sector may yield a "threefold increase and threefold decrease" effect: expanding service scale, improving efficiency, and enhancing user experience, while also reducing costs, minimizing contact, and controlling risks. Significant progress has already been made in areas such as payment systems and credit, but progress in intelligent investment advisory services remains insufficient. Big data and AI have a profound impact on financial risk mechanisms, disrupting traditional "financial accelerator" mechanisms, with important implications for financial stability and regulatory policies. To address challenges such as algorithmic black boxes, data privacy, and risk concentration, future financial regulation may need to incorporate a technological regulatory dimension, establish an algorithm audit system, implement regulatory sandbox concepts, and collaborate with innovative entities to jointly prevent systemic risks.