Two decades ago, who would have imagined that machines could predict the feasibility of a government project? Artificial Intelligence (AI) gains more usefulness as it serves as a predictive tool to ascertain whether to finance bankrupting banks, thereby saving funds and resources.
The predictive software was designed by researchers at the University College London (UCL) and the Queen Mary University of London. The AI tool determines the best strategy for taxpayers. Also, it assesses and suggests a suitable amount to be invested in the bank during a crisis. It also recommends the best bank to invest in.
Since governments make intrinsic decisions to bailout liquidating banks, which can result in major financial, social, and even political consequences, this technology would help increase banks’ equity and therefore reduce the risk of default.
Dr. Neofytos Rososthenous (Department of Mathematics, UCL) hoped that the high-tech tool designed to aid governmental financial decisions as it relates to banks bailout approach, governments would be able to arrive at the best interest of taxpayers, and if not economically feasible, the government can save the available fund and allow the bank to fail instead of suffering financial drain from uncertainties.
The team tested the AI tool using Markov Decision Process (a mathematical control process) to determine the length of a financial crisis, among other important factors provided by the model.
The AI algorithms works by “optimal bailout strategies, comparing no intervention to different types of interventions.” The result from the test showed a successful investment only if taxpayers’ stakes in banks are greater than a certain threshold value. The high-tech tool also predicted that once government invests in a bank, it would need to continue in that bank to prevent finance defaulting.
In summary, the AI model will soon enjoy employability in predicting how governments ought to respond during financial crises. “The predictive tool can be used to predict past crises so as to gain more knowledge to inform future decisions,” said Professor Vito Latora (Queen Mary University of London).
With the latest exploration of Artificial Intelligence, do you see a future where AI can be used to make critical decisions at the administrative level?
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Photo by iuriimotov
