ECB Paper Suggests Using AI for Financial Stability Monitoring

Financial stability monitoring could be significantly improved by using artificial intelligence to analyze millions of financial news reports, according to a European Central Bank (ECB) working paper.

The researchers developed an AI-based indicator called SPOT (Severity and Probability Of potential Trigger events), which measures the probability that an event will occur, the likely severity of its macro-financial impact, the expected timing of that impact, and the principal source of the trigger.

SPOT was tested on a vast database of financial news articles covering the period between 2005 and 2026. The indicator consistently increased ahead of major historical episodes of financial stress, including the global financial crisis, the euro area sovereign debt crisis, the Covid-19 pandemic, and Russia's invasion of Ukraine.

The researchers found that SPOT captures information not fully reflected in existing measures of financial stress, geopolitical risk, economic policy uncertainty, or market volatility. The indicator also provides policymakers with a structured and comprehensive picture of evolving financial stability risks and the factors driving them.