Episode 877: AI risk assessment vs something that could transform investment banking…#WeAskWatson
Apr 11, 2024
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Exploring risk assessment in AI and potential rule changes in investment banking. Importance of reliable evaluation methods for AI projects, funding solutions for AI risk assessment, and reversing investment research rules. Evolution of investment banking services post-crisis and impact of MiFID II on equity research teams
AI risk assessment challenges traditional methods, creating safety concerns for evolving technology.
Potential reversed investment research rules could transform investment banking, enhancing research quality and stimulating M&A activity.
Deep dives
Challenges of Evaluating AI Models
The complexity of artificial intelligence poses challenges for traditional evaluation methods, causing concern about accuracy and safety. Businesses and public bodies struggle to keep up with the pace of evolving AI technology. Funding discrepancies among companies developing AI models create an imbalance in the ecosystem, highlighting the need for critical evaluation of new AI releases.
Implications of Potential Reversal of Investment Research Rules
Proposed reversed investment research rules could impact the investment banking industry significantly. Legislation like Mifid II forced unbundling, affecting how investors pay for services like research and corporate access. Small and mid-cap companies faced challenges as larger firms prioritized coverage of well-known companies. If the rules change, investment banks might enhance their research teams, potentially benefiting investors with better quality insights and stimulating M&A activity.
UK Investment Banking Outlook and Regulatory Impact
Changes in research rules may positively impact UK investment banking by attracting more business and talent. Factors like increasing M&A activity, uncapped bonuses, and potential research enhancements make the UK a competitive hub for financial activities. This shift could lead to significant growth opportunities in the investment banking sector, with the UK emerging as an attractive destination for financial professionals and business activities.