Over a third of UK banks have reported a negative impact on the performance of machine learning models as a result of the coronavirus pandemic.
The survey of financial institutions conducted by the Bank of England found that around 35% of banks reported a ‘positive’ impact from Covid on the machine learning (ML) and data science (DS) technologies that support remote working among employees.
However, the central bank found that existing risks may be amplified or new risks may emerge from the use of ML and DS in financial services. For example, ML models may perform poorly when applied to a situation they have not encountered before in the training data. This is particularly relevant in the context of the Covid pandemic when the underlying data may have changed or the statistical properties of the data may have changed.
According to the survey, around 35% of banks reported a negative impact on ML model performance as a result of Covid. This is because the pandemic created a major downturn that could not have been forecasted on the basis of economic data alone or historical predictors.
"We will continue to monitor these developments closely, along with other regulators like the Financial Conduct Authority, and take necessary steps to support the safe adoption of ML and DS in financial services," states the Bank. "As Covid has resulted in changes in model performance, more continuous monitoring and validation is required to mitigate this risk, compared to static validation and testing methods."