The use of artificial intelligence in finance is still in its infancy but it needs to be monitored and possibly regulated to prevent harm to consumers and ensure the proper functioning of markets, the European Central Bank said this week.

The ECB saw a number of opportunities from the use of generative AI by banks and other financial institutions, such as superior processing of information, more efficient customer service and even a greater ability to spot cyberthreats.

But it also warned about risks including herding behaviour, over-reliance on a limited numbers of providers and more sophisticated cyberattacks.

“Therefore, the implementation of AI across the financial system needs to be closely monitored as the technology evolves,” the ECB said in an article published as part of its regular Financial Stability Review.

“Additionally, regulatory initiatives may need to be considered if market failures become apparent that cannot be tackled by the current prudential framework.”

The European Union has formulated the world’s first artificial intelligence rules, which will force general-purpose and high-risk AI systems to comply with specific transparency obligations and EU copyright laws.

So far, however, the ECB said the adoption of such systems by European financial companies was “in the early stages”.

“Market contacts indicate that euro area financial institutions may be slower to adopt generative AI, given the range of previously discussed risks (and) also considering potential reputational risks,” the ECB said.