Computer says no? A robot may decide who gets next bank bailout

Pedestrians walk past a bank branch of NatWest Group Plc on Queen Street in Cardiff, UK. The AI tool, described in a new peer-reviewed paper in Nature Communications, was tested by the authors using data from the European Banking Authority on a network of 35 European financial institutions. — Bloomberg

Governments could soon predict whether a bank bailout will ultimately save taxpayer money using an artificial intelligence tool developed at two London universities.

Researchers at UCL and Queen Mary University of London have built an algorithm that assesses whether a bailout is the best strategy for the public purse, according to a UCL release on Nov 17. It also suggests which firms should be saved as well as how much money should be spent.

The AI tool, described in a new peer-reviewed paper in Nature Communications, was tested by the authors using data from the European Banking Authority on a network of 35 European financial institutions.

It will help officials “assess specifically financial implications – this means checking if a bailout is in the best interest of taxpayers, or whether it would be better value for money to let the bank fail”, Neofytos Rodosthenous, one of the paper’s authors, said in the release. “Our techniques are freely available for banking authorities to use as tools in their decision-making process.”

A variety of finance firms were nationalised during the 2008 crisis, with taxpayers paying billions of pounds to support entities including the Royal Bank of Scotland, now called NatWest Group Plc. These interventions are still being unwound, with the UK still the biggest shareholder in NatWest. – Bloomberg