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From Data to Decisions: AI’s Role in Arab Banking

Introduction:

In the bustling financial epicenters of the Arab world, scenes reminiscent of global financial hubs unfold—a dedicated cohort of professionals diligently working late into the night, scrutinizing data and crafting presentations for clients. This tableau, emblematic of the finance industry’s enduring practices, has remained largely unaltered for decades, characterized by labor-intensive processes and reliance on conventional methodologies.

However, beneath this veneer lies a shifting landscape, marked by the transformative potential of artificial intelligence (AI) and the migration of tech talent from finance to the burgeoning tech sector. As we stand at this pivotal moment, it is incumbent upon banking leaders across the Arab world to recognize these changes and position themselves to capitalize on the opportunities they present.

The Potential of AI in Finance:

AI holds tremendous promise for the finance sector, offering the potential to revolutionize processes and augment human capabilities. From data collection and validation to predictive analysis, AI has the power to enhance efficiency and unlock valuable insights. By harnessing AI algorithms, financial institutions can extract actionable insights from vast datasets, empowering decision-makers with deeper market understanding.

Moreover, AI-driven predictive modeling can enhance forecasting accuracy and mitigate risks. Through advanced machine learning algorithms, finance professionals can uncover hidden patterns in data, leading to more informed decision-making and strategic planning.

Steering Talent Shifts:

In addition to AI’s transformative potential, there has been a notable migration of tech talent from finance to leading tech companies globally. While this trend underscores the allure of the tech sector, certain institutions in the Arab world have managed to retain their AI expertise. This underscores the importance of fostering an organizational culture that nurtures innovation and technological advancement, ensuring that talent remains engaged and motivated within the finance sector.

Big Tech’s Entry into Finance:

The expansion of tech giants into finance represents a seismic shift in the industry landscape. Companies like Amazon, Google, and Microsoft are venturing into heavily regulated sectors, including banking and healthcare. This expansion underscores the disruptive potential of large-scale diversification and highlights the need for traditional banking institutions to adapt and innovate in response.

For finance leaders in the Arab world, the entry of big tech into their domain presents both challenges and opportunities. While it may introduce increased competition and regulatory scrutiny, it also offers the potential for collaboration and partnership. By embracing technological innovation and fostering a culture of adaptability, Arab banks can position themselves as leaders in the digital age, driving sustainable growth and prosperity in the region’s finance sector.

Implications for Arab Banking and Finance:

In the Arab world, the convergence of AI and finance presents a unique set of challenges and opportunities. As global financial practices continue to evolve, Arab banks must adapt to remain competitive on the international stage. Embracing AI-driven innovation can enhance operational efficiency, improve customer experiences, and drive growth in the region’s finance sector.

Furthermore, fostering collaboration and knowledge-sharing initiatives can facilitate the adoption of AI technologies across the Arab banking industry, ensuring that institutions remain at the forefront of innovation and technological advancement. By embracing change and innovation, Arab banks can navigate the evolving financial landscape and emerge as pioneers in the digital age, driving sustainable economic growth and prosperity across the region.

Conclusion:

In conclusion, the intersection of AI and finance presents both unprecedented challenges and opportunities for banking leaders in the Arab world. By recognizing the transformative potential of AI and embracing a culture of innovation, Arab banks can navigate this evolving landscape and position themselves for sustained growth and success in the digital age. Through strategic partnerships, talent development initiatives, and a commitment to technological advancement, Arab banks can harness the power of AI to drive economic prosperity and financial inclusion across the region.

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Reflecting on the Implications of the 2023 Banking Crisis: Insights for Arab Financial Institutions

Introduction:

In the ever-evolving landscape of global finance, certain events serve as pivotal markers, shaping the trajectory of the industry and offering invaluable lessons for institutions worldwide. One such event is the 2023 banking crisis that unfolded in the United States, leaving a lasting impact on the financial sector and prompting a reevaluation of risk management practices and regulatory frameworks. As we delve deeper into the aftermath of this crisis, Arab banks and financial institutions are presented with a unique opportunity to glean insights and fortify their resilience in the face of future challenges.

Understanding the Crisis:

At the heart of the 2023 banking crisis lay the sudden collapse of three mid-size US banks, with Silicon Valley Bank (SVB) emerging as the most prominent casualty. SVB’s failure, fueled by a combination of factors including high exposure to long-term bonds and reliance on uninsured deposits, triggered a cascade of repercussions within the financial ecosystem. The ensuing bank run underscored the fragility of institutions and the interconnectedness of global markets, serving as a stark reminder of the importance of prudent risk management and regulatory oversight.

Key Takeaways for Arab Banks:

Enhanced Risk Management:

Arab banks must prioritize the implementation of robust risk management frameworks, incorporating stress-testing and scenario analysis to identify and mitigate potential vulnerabilities. By proactively assessing risk exposure across various asset classes and funding sources, institutions can bolster their resilience and navigate volatile market conditions with confidence.

Strategic Liquidity Management:

Maintaining adequate liquidity buffers is paramount for safeguarding financial stability and instilling investor confidence. Arab banks should adopt proactive liquidity management strategies, ensuring sufficient liquidity to meet depositor withdrawals and funding obligations while minimizing reliance on short-term funding sources.

Regulatory Compliance and Transparency:

In the aftermath of the crisis, regulatory scrutiny intensified, highlighting the importance of regulatory compliance and transparency in fostering market integrity and investor trust. Arab banks must adhere to stringent regulatory standards, engaging in transparent reporting and disclosure practices to enhance transparency and accountability.

Diversification of Funding Sources and Investments:

Overreliance on any single source of funding or investment exposes institutions to heightened risks. Arab banks should prioritize diversification of funding sources and investment portfolios, spreading risk across different asset classes and geographic regions. By embracing diversification, institutions can mitigate concentration risk and enhance long-term sustainability.

Strengthening Customer Relationships:

Amidst market turbulence, maintaining open lines of communication with customers is paramount. Arab banks should prioritize customer engagement initiatives, providing transparent and timely updates to depositors and investors. By fostering strong customer relationships built on trust and reliability, institutions can navigate periods of uncertainty with resilience and confidence.

Implications for the Arab Economy:

As Arab banks reflect on the lessons gleaned from the 2023 banking crisis, the implications extend beyond individual institutions to the broader economy. By fortifying their financial resilience and embracing prudent risk management practices, Arab banks can contribute to the stability and growth of the Arab economy as a whole. As engines of economic development and drivers of financial inclusion, Arab banks play a pivotal role in supporting entrepreneurship, facilitating investment, and fostering sustainable economic growth across the region.

Conclusion:

As we look ahead, the 2023 banking crisis serves as a poignant reminder of the inherent vulnerabilities within the financial system and the imperative for continuous vigilance and adaptation. Arab banks must heed the lessons of the past, fortifying their resilience and embracing innovation to navigate an increasingly complex and interconnected global landscape. By prioritizing risk management, regulatory compliance, and customer engagement, Arab banks can chart a course toward sustained growth and prosperity, ensuring a resilient future for the Arab economy and its stakeholders.

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Embracing Gender Equality: A Strategic Imperative for Banks in the Arab World

In the intricate tapestry of global economics, the imperative of gender equality transcends conventional notions of social justice, emerging as a linchpin for sustainable growth, societal cohesion, and financial resilience. This paradigm shift, from viewing gender equality as a moral obligation to recognizing its pivotal role in driving economic prosperity, underscores a fundamental truth: diverse, inclusive economies are not just morally right—they are economically robust and socially resilient.

Within the corridors of banking and finance, where decisions wield profound ramifications for global markets, the case for gender diversity is compelling. Research from institutions like the International Monetary Fund and the European Central Bank underscores a consistent narrative: gender-diverse teams outperform their homogenous counterparts. Firms with equitable gender representation in decision-making roles demonstrate greater financial resilience, innovation, and long-term profitability. Moreover, studies reveal that companies with more women in leadership positions exhibit stronger environmental, social, and governance (ESG) practices, positioning them as exemplars of sustainable business practices.

Beyond the boardrooms, the impact of gender equality reverberates across societal spheres, offering a blueprint for inclusive economic growth. Women, who influence a significant proportion of consumer spending decisions, are predisposed towards environmentally conscious choices. Consequently, businesses that integrate women’s perspectives into strategic decision-making processes are better positioned to tap into burgeoning markets for sustainable products and services. This underscores the symbiotic relationship between gender equality, environmental sustainability, and economic prosperity.

In the context of the Arab world, where economic transformation is underway, embracing gender equality assumes heightened significance. While strides have been made in promoting women’s participation in various sectors, significant barriers persist, hindering the realization of their full potential. Despite facing challenges in accessing financing and navigating cultural norms, an increasing number of women in the Arab world are venturing into entrepreneurship. However, the untapped potential of women remains vast, presenting an opportunity for banks and financial institutions to play a catalytic role in fostering gender-inclusive economic growth.

As stewards of economic progress and custodians of financial stability, banks in the Arab world stand poised at a critical juncture. By championing gender equality, banks can unlock a reservoir of talent, drive operational excellence, and bolster the resilience of financial institutions. Moreover, fostering an environment of inclusivity not only enhances the ethical standing of banks but also aligns with strategic imperatives for sustainable growth and innovation.

In conclusion, the journey towards gender equality is not merely a moral obligation—it is an economic imperative. By embracing diversity, fostering inclusion, and championing women’s empowerment, banks in the Arab world can propel the region towards a future of inclusive prosperity, resilience, and sustainable development. In doing so, they will not only enhance their own competitiveness but also contribute to the broader narrative of economic transformation and societal advancement in the Arab world.

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What Affect Bitcoin Price and How it is Shaping US Elections?

By Dr Soha Maad

Introduction

Bitcoin has experienced a remarkable surge over the last year, with its price climbing steadily through 2023 before surging in late January 2024 and throughout February 2024. Bitcoin was recently trading at around $72,572 mark in March 2024, up 71.35% for the year-to-date and 199% in the last 12 months. This significant rise in Bitcoin’s value has captured the attention of investors and financial experts once again, sparking discussions about the potential implications for the cryptocurrency market in the coming years. Moreover, analysts predicts that Bitcoin price could potentially surge to $280,000 within the next three years, driven by the anticipated Bitcoin Exchange-Traded Fund ETF inflows.

This article examines how Bitcoin price is determined and overviews Bitcoin asset protocol BRC-20, Bitcoin halving, Bitcoin mining, and Bitcoin ETF. The article also presents an analysis of the impact of Bitcoin price rise on the outcome of United States (US) election in 2024.

How Bitcoin Price Is Determined           

The value of Bitcoin (BTC), unlike traditional fiat currencies such as the Euro or the United States US Dollar, is not determined by a centralized authority like a central bank. Instead, Bitcoin’s price is determined based on supply and demand. Bitcoin has a supply cap where no more than 21 million BTC will ever exist. Bitcoin’s price increases when demand exceeds supply and decreases when demand falls. Other factors such as the cost of producing Bitcoin through mining, regulations, news, and competition from other cryptocurrencies can influence the supply and demand and thus, influence the Bitcoin’s price.

The price volatility of Bitcoin has left many skeptics questioning the mathematical and economic basis of price movements while searching for a generalized justification for its valuation. Since Bitcoin is decentralized, it doesn’t follow the monetary policy of governments, and Bitcoin is not backed by any underlying asset or government.

The price of Bitcoin is determined by supply and demand. Like fiat currency, when the demand for Bitcoin increases, the price increases. When demand for Bitcoin falls, the price falls.

On the supply side, Bitcoin is a unique asset in that its new supply schedule is absolutely inelastic; it is completely immune to fluctuations in demand. When most goods, including fiat currency and gold, experience a rise in demand, producers react by increasing production and returning prices to an equilibrium. When demand for Bitcoin rises, thanks to the difficulty adjustment, the production of new Bitcoin does not rise.

The stock-to-flow (S2F) model is commonly used to analyze the impact of scarcity on the price of an asset. The stock-to-flow ratio is a number that indicates how many years it will take to produce the current stock at the current production rate. Essentially, the stock-to-flow ratio is the inverse of the inflation rate of an asset. According to the stock-to-flow model, a higher stock-to-flow ratio should yield a higher price.

Every four years, the Bitcoin halving cuts the block subsidy in half, reducing the flow of new Bitcoin into the market, thereby increasing the stock-to-flow ratio and making Bitcoin even more scarce. If the stock-to-flow model is applied to Bitcoin, this should trigger a rise in price, and indeed, each past halving has triggered a dramatic price rise.

Bitcoin’s scarcity significantly impacts its price, largely because there is a hard cap on the total amount that will ever exist (only 21 million Bitcoins). Unlike fiat currencies, which central banks can print indefinitely, Bitcoin’s supply is fixed. This scarcity is reinforced by the way new Bitcoins are created through the mining process, which is designed to slow down production over time through the halving.

Bitcoin’s monetary policy is transparent and predictable since everyone knows exactly how many Bitcoin are currently available and what will be the maximum that will ever be created. This transparency gives investors confidence, knowing that Bitcoin’s value cannot be diluted by unexpected increases in supply. This known scarcity and predictability make Bitcoin a compelling option for investors looking to protect their wealth from inflation or monetary debasement, where traditional currencies might lose value over time.

Bitcoin is deflationary due to its finite supply. The finite supply protects Bitcoin from hyperinflation.

Bitcoin Asset Protocol BRC-20

BRC-20 is an experimental token standard that enables the minting and transferring of fungible tokens on the Bitcoin blockchain. It stands for Bitcoin Request for Comment and is similar to the ERC-20 token standard on ethereum (ETH).

BRC-20 tokens were first proposed in March 2023 by an anonymous developer known as Domo. The development of the BRC-20 token standard rose from the growing demand for fungible tokens within the realm of the Bitcoin blockchain. While ERC-20 tokens are widely embraced on the ethereum blockchain, they don’t have the same compatibility with the Bitcoin blockchain. This gap acted as the driving force behind the inception of BRC-20 tokens, providing developers with a tailored solution to generate fungible tokens that seamlessly integrate with the Bitcoin blockchain via the ordinals protocol.

BRC-20 tokens represent an emerging token standard that harmonizes effectively with the Bitcoin blockchain. They bring forth a host of promising advantages. Constructed on the foundation of the Bitcoin blockchain, recognized for its unparalleled security and decentralized structure, BRC-20 tokens establish a high level of security and safeguarding against fraudulent activities. Notably, these tokens adhere to the principle of fungibility, signifying their ability to be swapped out and represent diverse values interchangeably. This inherent adaptability positions them as a prime candidate for diverse applications, including but not limited to loyalty programs and crowdfunding platforms. Moreover, BRC-20 tokens possess transferability, implying their capability to be smoothly transmitted and received between different wallets linked to the Bitcoin network. This inherent feature ensures user-friendliness and broad accessibility across a diverse user base.

Transaction fees associated with BRC-20 tokens are settled in Bitcoin. This cost-efficient characteristic renders them an economical choice catering to both enterprises and individuals seeking streamlined transactions.

Bitcoin Halving

Even though Bitcoin is digital money, it cannot be created endlessly, and verifiable scarcity is core to its value proposition. Foundational to the Bitcoin protocol are two concepts relating to scarcity:

First, there is Bitcoin’s limited supply. The protocol dictates that the total number of Bitcoins that can ever exist is capped at 21 million, and it is impossible for more Bitcoins to ever exist. This is contrary to fiat currencies, where more money can be printed at the discretion of the government or central bank, potentially leading to inflation.

The second concept is referred to as the halving. Approximately every four years, the Bitcoin mining reward, also known as the “block reward,” is halved. This means that the reward given to the contributors securing the network is reduced by 50%, directly impacting the rate at which new Bitcoins are introduced into circulation.

In May 2020, the amount of new Bitcoins added to the network (every 10 minutes) via virtual “mining” was halved from 12.5 to 6.25. In April 2024, it will drop again to around 3.125 — and the process will continue until all 21 million coins have been mined. At this point, miners will rely solely on transaction fees to validate blocks.

By issuing fewer Bitcoins over time, the halving makes it more likely that Bitcoin’s value will rise (assuming consistent levels of demand), which is in sharp contrast to fiat currencies, which typically decline in value over time via inflation.

The halving is one of the ways Bitcoin’s protocol maintains scarcity, and scarcity is one of the reasons why Bitcoin is sought after by millions of people. But scarcity is not the only reason why Bitcoin halving is important, and there are other elements that make the halving an event closely followed.

As of March 2024, Bitcoin has already gone through three halvings:

  • On November 28, 2012, the reward dropped from 50 to 25 Bitcoins per block.
  • Then on July 9, 2016, it went down again from 25 to 12.5 Bitcoins per block.
  • And most recently, on May 11, 2020, it halved from 12.5 to 6.25 Bitcoins per block.
  • Since Bitcoin blocks are mined about every 10 minutes, the next halving is projected to occur around the third week of April 2024, lowering the mining reward to 3.125 Bitcoins per block.

Bitcoin Mining

Bitcoin uses a proof-of-work (PoW) system to validate transaction information, called this way because solving the encrypted hash takes time and energy, which acts as proof that work was done. In this system, individuals use computers or specialized mining rigs to join the Bitcoin network, acting as both transaction processors and validators.

Once a block is filled with transactions, it is closed and sent to a mining queue, where miners race to be the first to solve the block’s cryptographic puzzle. When the miners confirm the legitimacy of the transactions in a block, they open a new one and receive a reward for their work. This process creates a chain of blocks containing information, creating what we know as the blockchain. With each halving event, the reward for these network contributors is slashed by half, slowing down the pace at which new Bitcoins are introduced into circulation. For context, as of March 2024, more than 19 million Bitcoins have been mined, meaning there are approximately 2 million Bitcoins left to be virtually mined.

Bitcoin ETF

A Bitcoin ETF (Exchange-Traded Fund), is a type of investment fund that tracks the price of Bitcoin and trades on traditional stock exchanges.

Essentially, a Bitcoin ETF allows investors to gain exposure to Bitcoin without needing to directly hold the cryptocurrency. Instead, they can buy and sell shares of the ETF through their brokerage accounts, just like they would with any other stock.

The creation of Bitcoin ETFs has been a significant development for the cryptocurrency market. It is a new way for traditional investors to participate in Bitcoin’s potential gains without the need to own and store the digital asset directly. Additionally, regulatory bodies’ approval of Bitcoin ETFs has been seen as a step towards mainstream acceptance.

Bitcoin Price Impact On 2024 US Elections

Crypto holders will have major impact on the outcome of United States 2024 elections. Millions of crypto holders who are voting live in key swing states where the last presidential election was decided by the narrowest of margins. Millions of US voters consider crypto to be a make-or-break issue at the ballot box, according to research from Morning Consult. The rise of the crypto voter tracks directly with the rise of crypto as an asset class. Many analysts see that the votes of the crypto holders will determine who will win the key to the White House.

Swing voters decide elections. That is why campaigns are building their teams in battleground states like New Hampshire, Nevada, Ohio, and Pennsylvania. Morning Consult conducted a poll to gauge crypto sentiment in these four swing states. In doing so, it discovered millions of Americans for whom digital assets is a top issue. Approximately 18% of voters in these states (or 3.4 million people) hold digital assets and 55% of voters are less likely to vote for candidates who stand in the way of crypto values. Those values include a belief that the current economic system is not fair and favors big business, and a corresponding desire for a decentralized, web3 economy.

In other words, crypto could decide the votes of up to 1.9 million voters across these four swing states alone. This is enough to win the election.

Given the rapid growth of crypto voting bloc, candidates could redraw the electoral map in 2024 by simply adopting pro-crypto positions. Whichever presidential nominee secures the crypto vote could also secure the White House.

There are tens of millions of Americans who have participated in the crypto economy. Any politician who ignores this passionate community is missing an important and motivated part of the American electorate.

Given Biden’s aggressive approach to digital asset regulation, Donald Trump may distinguish himself from his competitor by taking the opposite tack. By simply embracing Bitcoin and the values of decentralization, Trump could poach pro-crypto Democrats and Independents that would have otherwise voted for Biden. And he could make a play for the 1.9 million people in swing states like New Hampshire, Nevada, Ohio, and Pennsylvania for whom crypto is a top concern.

FOX Business analyst noted that the cryptocurrency industry is gaining influence as the 2024 U.S. elections draw near.

Recently, US president Joe Biden unveiled his 2025 budget proposal, which includes several provisions designed to impact the cryptocurrency industry. These measures encompass a wash sale rule for digital assets and an excise tax targeting crypto mining operations.

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Resilience in Turbulent Times: Strategies for Arab Banks in a Shifting Economic Landscape

  • Global Economic Outlook: Cautious Optimism amidst Uncertainty
  • Arab Banks Brace for Challenges amidst Shifting Global Dynamics
  • Navigating Risks: Strategic Imperatives for Arab Banks in 2024

As the calendar turned to 2024, the prevailing sentiment among economists and policymakers remains cautiously optimistic, with discussions at prominent forums such as the World Economic Forum in Davos reflecting a consensus towards a potential soft landing for the global economy. Noteworthy is the shift in perspective even among traditionally bearish voices, as exemplified by economist Nouriel Roubini, who now considers worst-case scenarios as improbable. This collective optimism is underpinned by several factors, including the resilience exhibited by the US economy and the anticipated dividends from advancements in artificial intelligence fostering productivity growth.

Conversations with CEOs and policymakers during the recent World Economic Forum emphasized the significance of the global economy’s resilience in the face of challenges such as geopolitical tensions and disruptions in global trade. Despite these headwinds, the absence of a recession in 2023, despite notable interest rate hikes, has bolstered confidence in the economic outlook for 2024. Many experts attribute this resilience to the US economy’s performance, which has exceeded expectations, and anticipate further momentum through technological innovations.

The consensus among economists, as outlined in the Chief Economists Outlook for January 2024 by the World Economic Forum, suggests a mild global downturn anticipated as a corrective measure to alleviate inflationary pressures stemming from heightened demand. However, this optimism is tempered by underlying risks and uncertainties that warrant careful consideration.

Chief among these concerns is the reliability of economic data emanating from China, particularly regarding GDP growth figures, amidst a backdrop of political consolidation and economic challenges. The repercussions of a potential slowdown in the world’s second-largest economy, coupled with vulnerabilities in the real estate sector, resonate globally and necessitate a nuanced approach in risk assessment and strategic planning.

Similarly, Europe faces a landscape characterized by sluggish economic growth and geopolitical uncertainties, compounded by the repercussions of policy initiatives such as the Inflation Reduction Act in the United States. Arab banks, in particular, must navigate through these complexities, given their interconnectedness with global financial markets and the potential spillover effects of policy shifts and economic developments on regional stability and growth prospects.

For Arab banks, the evolving global economic dynamics underscore the importance of a robust risk management framework and a proactive approach to identifying and mitigating potential vulnerabilities. This necessitates not only a keen understanding of macroeconomic trends but also a nuanced appreciation of regional dynamics and their implications for banking operations and strategic decision-making.

Furthermore, the lack of bipartisan consensus in the United States regarding fiscal responsibility poses additional challenges, with potential ramifications for global financial markets and liquidity conditions. Arab banks must remain vigilant and adaptive in response to evolving regulatory and market dynamics, ensuring resilience in the face of uncertainty.

In conclusion, while prevailing sentiment suggests a potential soft landing for the global economy, the road ahead is fraught with uncertainties that demand careful navigation and strategic foresight. For Arab banks, this entails a comprehensive assessment of global economic trends, coupled with a nuanced understanding of regional dynamics, to inform prudent decision-making and safeguard financial stability amidst a dynamic and interconnected landscape. By prioritizing risk management, resilience, and agility, Arab banks can position themselves to capitalize on opportunities and navigate through challenges, contributing to sustainable growth and stability in the Arab world’s banking sector.

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Advancing Equitable Distribution of Technological Innovation: A Strategic Imperative for Arab Banks

  • Equitable Tech Prosperity: Unveiling the imperative for fair distribution of tech wealth, highlighting challenges posed by Big Tech monopolies.
  • Banking’s Vital Role: Illuminating the pivotal role of banks, particularly in the Arab world, as catalysts for equitable economic growth.
  • Call to Action: Advocating for systemic change through regulatory intervention, investment in digital infrastructure, and collaborative initiatives, ensuring technology benefits everyone.

In the ever-evolving landscape of technological progress, the equitable distribution of its benefits emerges as a paramount challenge, resonating deeply within the purview of banking and financial institutions, particularly in the Arab world. As custodians of economic stability and facilitators of capital allocation, Arab banks are uniquely positioned to shape the trajectory of innovation-driven growth while ensuring inclusivity and social cohesion. This discourse underscores the imperative for strategic leadership and collaborative action to harness the transformative potential of technology for the collective prosperity of society.

Within the realm of corporate governance, the issue of executive compensation assumes heightened significance, exemplified by the lavish remuneration packages bestowed upon industry luminaries such as Elon Musk. Arab banks, cognizant of their pivotal role in fostering transparency and accountability, must advocate for governance frameworks that align executive incentives with long-term value creation and stakeholder interests. By promoting prudent governance practices and ethical stewardship, Arab banks can engender trust and confidence, thereby fostering a conducive environment for sustainable innovation and equitable wealth distribution.

Moreover, the ascendancy of Big Tech conglomerates underscores the need for proactive intervention to safeguard market competition and consumer welfare. Arab banks, as custodians of financial intermediation, possess the requisite expertise and influence to advocate for regulatory measures aimed at curbing monopolistic tendencies and fostering a level playing field. Collaboration between banks, regulatory authorities, and industry stakeholders is essential to develop robust regulatory frameworks that promote innovation while safeguarding against systemic risks and market distortions.

In parallel, Arab banks must seize the opportunity to leverage digital transformation as a catalyst for inclusive economic development. By investing in digital infrastructure and fintech innovation, banks can enhance financial inclusion, expand access to credit, and empower underserved communities to participate in the digital economy. Collaborative initiatives such as digital identity verification and mobile payment platforms hold immense potential to democratize financial services and catalyze entrepreneurship, thereby narrowing the socio-economic gap and fostering social mobility.

Furthermore, the establishment of public-private partnerships and ecosystem collaborations is pivotal in harnessing the transformative power of technology to address pressing societal challenges. Arab banks, as trusted financial intermediaries, can play a pivotal role in mobilizing capital towards sustainable development goals, including renewable energy, infrastructure, and healthcare. By embracing a holistic approach to sustainable finance and impact investing, banks can align their business objectives with broader societal imperatives, thereby driving positive change and fostering resilience in the face of global challenges.

In conclusion, the equitable distribution of technological innovation represents a strategic imperative for Arab banks, encapsulating the principles of inclusive growth, ethical stewardship, and social responsibility. By championing governance reforms, advocating for regulatory measures, and spearheading digital transformation initiatives, Arab banks can position themselves as catalysts for positive change, driving sustainable economic development and fostering a more prosperous and equitable society in the Arab world and beyond.

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Embracing Responsible AI in 2024: A Path to Prosperity and Equity

  • Global Shift: Prioritizing Fairness over Corporate Gains
  • Diversity Matters: Inclusive AI Governance for All
  • Shaping Tomorrow: Arab Bankers’ Role in AI’s Responsible Evolution

As artificial intelligence (AI) continues its rapid expansion into all facets of our lives, 2024 presents a pivotal moment for steering its trajectory towards a future defined by equity, prosperity, and responsibility. The lessons learned from the digital revolution serve as guiding inspirations, reminding us to prioritize fairness over corporate gains and to uphold the values of justice and inclusivity.

The beginning of 2024 has brought with it an outbreak of speculations regarding the course of AI development, ranging from optimistic outlooks to cautious deliberations. What remains indisputable is the transformative power of AI in reshaping human existence. To navigate this paradigm shift effectively, we must evolve alongside it.

Drawing parallels with the rise of the internet and social media, questions inevitably arise: Can we maintain our current momentum while avoiding the pitfalls of the past? And can we ensure that the benefits of AI are accessible to all, including the millions who are still disconnected from the digital realm?

Realizing the potential of AI to usher in an equitable and human-centered future necessitates innovative, inclusive approaches. Encouragingly, three notable trends offer promise for the year ahead.

Firstly, the prioritization of AI regulation on a global scale signifies a concerted effort towards responsible AI governance. Initiatives such as the European Union’s AI Act and President Joe Biden’s executive order underscore a shift towards policies rooted in equity, justice, and democratic principles. The establishment of the United Nations High-Level Advisory Body on AI further solidifies this commitment, poised to advance initiatives aimed at governing AI for the collective good.

Secondly, the cultivation of a diverse and ethical cadre of AI professionals stands as a cornerstone of responsible AI implementation. By expanding initiatives like the National Artificial Intelligence Research Resource Task Force and localizing implementation strategies, inclusive governance frameworks can shape the development of AI in 2024 and beyond.

At the national level, the focus is on regulating AI-generated content and empowering policymakers and citizens to combat threats to civic participation. With numerous countries holding pivotal elections this year, proactive measures to counter misinformation and promote media literacy are imperative.

Moreover, the integration of AI into public infrastructure and policy-making processes presents unprecedented opportunities for societal advancement. Initiatives such as India’s AI-powered railway enhancements and Brazil’s digital payment systems exemplify the transformative potential of AI in addressing pressing challenges.

As we chart the course for AI in 2024, it is essential to recognize the pivotal role of civil society in harnessing AI for societal good. Initiatives like AI-powered healthcare solutions and digital transformation projects within the non-profit sector demonstrate the tangible benefits of AI when deployed responsibly.

Furthermore, fostering diversity and inclusivity in the AI ecosystem is paramount. Organizations dedicated to amplifying underrepresented voices, particularly those of women and people of color, are laying the foundation for a more inclusive future of AI innovation.

In shaping our engagement with AI, we must anchor our efforts in shared values of diversity, inclusiveness, and peace. Multi-stakeholder frameworks, such as UNESCO’s Recommendation on the Ethics of Artificial Intelligence, provide essential guidance for navigating ethical complexities.

Looking ahead, it is imperative to learn from the successes and failures of past technological revolutions. By reaffirming our commitment to fairness and dignity, we can forge a new global paradigm where AI serves as a catalyst for prosperity for all.

In conclusion, 2024 holds immense potential for advancing responsible AI practices that prioritize equity and human well-being. As bankers and professionals in the Arab world, embracing this vision requires active participation in multi-stakeholder partnerships and a steadfast commitment to shaping a future where AI fosters prosperity for all citizens of the global community.

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New Eu Ai Act 2024: Impact On Arab Banks

By Dr Soha Maad

Introduction

The European Union (EU) recently approved the new Artificial Intelligence act (EU AI act) to regulate the use of Artificial Intelligence (AI) and to make it more responsible and to reduce the misuse of AI especially in disinformation and misinformation. The new EU AI act classifies AI based systems into high and low risk systems and will be enforced through various measures. The new EU AI act will have an impact on technology firms and all institutions inside and outside the EU. Banks will also be concerned with the new EU AI act and will have to comply with its mandates.

This article overviews the new EU AI act. The overview covers the main legal issues addressed in the EU AI act, its impact inside and outside the EU and the measures to enforce it. The article concludes with a roadmap for Arab banks and institutions to prepare for the new EU AI act and its various implications.

The Eu Ai Act Risk Based Framework

As part of its digital strategy, the EU is regulating artificial intelligence (AI) to ensure better conditions for the development and use of this innovative technology. AI can create many benefits, such as better healthcare; safer and cleaner transport; more efficient manufacturing; and cheaper and more sustainable energy.

The European Commission proposes a regulatory framework for AI. AI systems that can be used in different applications are analysed and classified according to the risk they pose to users. The different risk levels determine the level of regulation.

The EU Parliament priority is to make sure that AI systems are safe, transparent, traceable, non-discriminatory and environmentally friendly. AI systems should be overseen by people, rather than by automation, to prevent harmful outcomes.

The EU parliament also is establishing a technology-neutral, uniform definition for AI that could be applied to future AI systems.

The new EU AI Act rules establish obligations for providers and users depending on the level of risk from artificial intelligence. While many AI systems pose minimal risk, the risk level need to be assessed.

The EU Artificial Intelligence Act (EU AI Act) aims to govern the use of artificial intelligence within the EU. The new EU AI Act adopts a risk-based approach in regulating AI products and services. Rather than focusing solely on the technology, the new EU AI act emphasizes the regulation of the use of AI. The objective of the new EU AI act is to include safeguarding democracy, upholding the rule of law, protecting fundamental rights (such as freedom of speech), and promoting investment and innovation.

The severity of the EU AI act regulations depends on the risk level associated with specific AI applications.

Under the new EU AI act, AI systems are classified in various risk categories:

  • Unacceptable risk AI systems
  • High risk AI systems
  • Limited risk AI systems
  • Low and minimal risk AI systems

Examples Of Unacceptable Risk Ai Systems

Unacceptable risk AI systems are systems considered a threat to people and are banned under the new EU AI act. These systems include:

  • Systems for cognitive behavioural manipulation of people or specific vulnerable groups. Examples of these systems are voice-activated toys that encourage dangerous behaviour in children.
  • Social scoring systems: These systems classify people based on behaviour, socio-economic status or personal characteristics.
  • Real-time and remote biometric identification systems, such as facial recognition

Examples Of High-Risk Ai Systems

Examples of high-risk AI systems as defined by the EU AI Act include:

  • Medical Devices and Diagnosis: AI systems used for medical diagnosis, treatment planning, or patient monitoring fall into the high-risk category. These systems directly impact patients’ health and well-being.
  • Transportation and Autonomous Vehicles: Self-driving cars and other autonomous vehicles rely heavily on AI. Their operation involves safety-critical decisions, making them high-risk applications.
  • Critical Infrastructure and Energy Systems: AI systems controlling power grids, water supply networks, and other critical infrastructure are high-risk. Failures in these systems can have severe consequences.
  • Biometric Identification and Surveillance: Facial recognition systems, especially when used for law enforcement or surveillance, pose significant risks to privacy and civil liberties.
  • Educational AI: AI systems used in educational settings, such as automated grading or student performance prediction, can impact students’ futures and must be carefully regulated.
  • Recruitment and Employment Decisions: AI-driven hiring tools, if biased or discriminatory, can perpetuate inequalities. Ensuring fairness and transparency is crucial.
  • Financial Services and Credit Scoring: AI algorithms used for credit scoring, loan approvals, or investment decisions fall under high-risk categories due to their impact on individuals’ financial lives.
  • Criminal Justice and Predictive Policing: AI systems used by law enforcement agencies for predictive policing or risk assessment can affect people’s rights and freedoms.

The new EU AI Act aims to strike a balance between innovation and protection, ensuring that high-risk AI systems are developed and deployed responsibly. All high-risk AI systems will be assessed before being put on the market and also throughout their lifecycle.

Examples Of Low-Risk Ai Systems

Examples of low-risk AI systems as defined by the EU AI Act include:

  • Content Recommendation Algorithms: These algorithms suggest articles, videos, or products based on user preferences. While they impact user experiences, they pose minimal risks.
  • Spam Filters: Email spam filters use AI to identify and filter out unwanted messages. Their impact is relatively low.
  • Language Translation Tools: AI-powered language translation services help users understand content in different languages. Errors may occur, but the risks are generally low.
  • Virtual Assistants (Chatbots): Chatbots that assist with answering queries, providing information, and engaging in conversations fall into the low-risk category.
  • Basic Image Recognition: Simple image recognition tools identify objects, animals, or scenes in images. These tools do not have significant consequences and fall into the low-risk category.
  • Spell Checkers and Grammar Correction: AI-driven tools that correct spelling and grammar errors in text fall into the low-risk category.
  • Basic Personalization Algorithms: Websites and apps use AI to personalize content based on user behavior (e.g., showing relevant ads). These systems have minimal impact and fall into the low-risk category.

Low-risk AI systems still require transparency and ethical considerations, but their potential harm is relatively limited.

Enforcement Of The New Eu Ai Act Law

The European Union (EU) has taken a significant step by introducing the Artificial Intelligence Act (AI Act), the world’s first comprehensive law specifically addressing AI. The EU AI Act law will be enforced through various measures:

  • Binding Rules on Transparency and Ethics: The AI Act imposes legally binding rules on tech companies, ensuring transparency and ethical practices. Tech companies must notify users when interacting with chatbots, biometric categorization, or emotion recognition systems. Tech companies should also label deepfakes and AI-Generated Content ensuring users can distinguish between real and AI-generated media. Tech companies must also conduct impact assessments. Organizations offering essential services (such as insurance and banking) must assess how AI systems affect fundamental rights.
  • The Development of Foundation Models: The new EU AI act proposes new foundation and powerful AI models to be used for various purposes. These includes models like ChatGPT.
  • EU as the AI Police: The EU aims to become the world’s go-to tech regulator by enforcing binding rules on AI. The AI Act introduces governance mechanisms to regulate an influential sector globally.

The new EU AI Act is expected to take effect two years after the final approval by European lawmakers in early 2024. Violations could result in fines of up to 35 million euros or 7% of a company’s global revenue.

Global Impact Beyond The Eu

The new EU AI Act brings essential rules and enforcement mechanisms to the AI domain, promoting responsible practices and protecting fundamental rights. Its impact will resonate beyond Europe, shaping AI governance worldwide.

While the new EU AI Act directly applies in the EU countries, its influence extends beyond Europe shaping global standards. As a world-leading set of rules, the new EU AI act may serve as a reference point for other regions and countries in their own AI regulations.

The EU AI Act represents a significant step toward responsible AI governance, emphasizing risk assessment, transparency, and protection of fundamental rights. Its impact will likely resonate worldwide as other jurisdictions consider their own AI frameworks.

Impact Of Eu Ai Act On Banks

The new EU Artificial Intelligence Act (EU AI Act), will significantly impact various economic sectors, including the banking and financial sectors. The EU AI Act affects banks and financial institutions in various ways:

  • Financial sector firms are more likely to use some of the classes of software regulated by the new EU AI act. Examples of these software are biometric identification tools and tools for credit assessment of individuals.
  • The AI Act imposes obligations on banking and financial software providers, importers, distributors, and users.
  • Banks and financial institutions should clearly identify their artificial intelligence systems that are subject to the new EU AI act regulations.
  • Banks and financial institutions must develop procedures, systems, and controls to ensure compliance with the new EU AI act that applies within the EU and beyond the EU.
  • Banks and financial institutions need to prepare and adapt to the evolving landscape of AI regulation.
  • The new EU AI Act represents a significant step toward responsible AI governance in banks and financial institutions, emphasizing risk assessment, transparency, and protection of fundamental rights. The impact of the new EU AI act will likely resonate worldwide as other jurisdictions consider their own AI frameworks.

Road Ahead For Arab Banks

The EU’s proposed regulation on artificial intelligence (EU AI Act) aims to establish a harmonized framework that balances the benefits and risks of AI systems. Arab banks and financial institutions should comply with the new EU AI act. Key steps for Arab banks and financial institutions to undertake in order to comply with the new EI AI Act include:

Step #1. Conducting a risk-based analysis: The AI Act categorizes AI systems into various risk levels: minimal or no risk, limited risk, high risk, and unacceptable risk. Unacceptable risk AI systems will be strictly prohibited, with obligations tapering based on risk level.

Step #2. Understanding applicability: Financial institutions both within and outside the EU should understand the potential effects of the new EI AI Act. It will be directly applicable across EU member states and will apply to all AI systems placed in the global market.

Step #3. Navigating the regulatory landscape: Arab banks should start assessing their AI systems in order to navigate the evolving global regulatory landscape effectively. This involves identifying AI-related activities, assessing risk profiles, and adopting suitable frameworks.

Step #4. Avoiding fines and penalties: Financial institutions could face fines of up to €40 million for non-compliance with the new AI act. Arab banks, operating in the global markets, should avoid fines and penalties for non-compliance with the new EU AI act.

Step #5. Stay informed: The AI Act is still subject to change as a result of ongoing negotiations, but staying informed and proactive will be crucial for compliance.

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Deciphering Global Economic Dynamics: A Cautiously Optimistic Approach in 2024

As we stand on the threshold of 2024, the global economic landscape appears increasingly complicated, with monthly inflation data in key regions surpassing expectations. The markets are on edge, prompting analysts to reevaluate their forecasts. In this uncertain environment, caution prevails, but amid the ambiguity, there remains room for optimism.

In a recent analysis, an exploration should be done of the central role of inflation trends in shaping the outlook for the world economy. Despite acknowledging the countless risks, the evidence presented still aligns with a cautiously optimistic perspective. Ongoing conflicts in the Middle East and Ukraine, coupled with uncertainties surrounding China and impending elections in Europe and the United States, add layers of complexity to the economic tapestry.

Our initial optimism was rooted in indicators suggesting positive directions in underlying factors affecting inflation. However, the latest data for December from the eurozone, the United Kingdom, and the United States have introduced a note of caution. Policymakers, investors, and analysts find themselves pausing after weeks of anticipating substantial interest-rate cuts this year.

Wage gains, a critical factor in the inflation equation, present a delicate balance. While the hope is for these gains to persist without fueling a sustained rise in prices, economists and central bankers emphasize the necessity of productivity growth. The conundrum lies in waiting for lagging productivity data while avoiding premature reactions that might impede economic recovery.

Three compelling reasons advocate for a measured approach. Foremost, the unexpected and persistent weakness in productivity over the past two decades has led forecasters to revise their expectations. However, recent developments in artificial intelligence, the shift to alternative energies, and changes in working patterns since the pandemic offer glimmers of hope for a productivity resurgence.

The second rationale centers on the cyclical factors influencing major economies. Chinese economic data and financial-market performance remain lackluster despite governmental efforts to stimulate recovery. Conversely, the United States witnesses stronger-than-expected economic indicators, providing relief, though concerns linger about the sustainability of these positive trends.

The third reason involves the social and human dimensions of wages and productivity. Median real wages have lagged in recent decades, contributing to growing disillusionment with capitalism and globalization. Acknowledging the potential impact on political attitudes, the article suggests that an increase in real wages could serve to moderate these sentiments.

Amid the nuanced assessment of global economic factors, questions arise about the relevance of these discussions to the Arab world. In the Arab region, where economic dynamics intertwine with geopolitical intricacies, the cautious optimism resonates profoundly. Arab banking and economic sectors, mirroring global counterparts, face challenges and uncertainties. The Arab world, with its diverse economies and geopolitical considerations, must carefully navigate these global trends. In a region where commodity-price volatility and external influences impact economic stability, understanding the delicate interplay of global factors becomes paramount.

As we step into the unknowns of 2024, Arab business leaders and economists find themselves at a crossroads. The delicate balance between caution and optimism is not unique to a particular region but resonates globally. In a world interconnected by economic forces, the challenges and opportunities highlighted in this analysis underscore the importance of informed decision-making, adaptability, and a nuanced understanding of the intricate threads that weave the global economic fabric.

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Piloting the Nexus: A Diplomatic Discourse on Global Economic Challenges and Security Imperatives

In the complex scene of today’s global landscape, the symbiotic relationship between economics and security demands a meticulous examination. Against the backdrop of geopolitical flux, emerging market ascendancy, and technological leaps, policymakers find themselves at a crossroads, necessitating a nuanced and comprehensive economic-security agenda. This imperative is underscored by recent events, which illuminate the profound repercussions of conflicts, disruptions, and the delicate equilibrium between prosperity and security.

A critical aspect requiring scrutiny is the influence of geopolitics on the global economy. From the Russian incursion into Ukraine to the conflict in Gaza, struggles have proven to be catalysts reshaping trade, investment flows, and policies with resounding ramifications. Western sanctions on Russia, intertwined with disruptions in Ukrainian grain exports, served as a stark reminder of the intricate web that connects economies worldwide. China’s strategic deepening of economic ties with Russia, following the exodus of Western firms, serves as a testament to the strategic considerations inherent in this complex geopolitical chessboard.

Concurrently, the nexus between natural threats and economic stability adds an additional layer of intricacy. The COVID-19 pandemic precipitated a paradigm shift from efficient “just-in-time” supply chains to a more resilient “just-in-case” model, underscoring the imperative of adaptability in the face of unforeseen disruptions. Furthermore, an El Niño-induced drought impacting the Panama Canal, a linchpin of global commerce, accentuates the vulnerability of vital economic arteries to ecological challenges.

The second dimension necessitates a careful examination of the implications of global economic relations for national security. Nations tethered by robust economic ties are predisposed to adopt assertive security policies, utilizing economic dependencies as tools of political influence. China’s Belt and Road Initiative serves as a paradigmatic illustration, where economically reliant nations are anticipated to align with China’s geopolitical objectives. The subtle weaponization of economic networks for geopolitical gains, underscores the delicate interplay between economic collaboration and security imperatives.

The third dimension delves into the intricate relationship between global economic competition and prosperity. The pursuit of material well-being is now intricately interwoven with security considerations. This conundrum is particularly pertinent for the United States and its allies, where economic and military dominance necessitates a judicious approach to sustain a rules-based global economy and foster a peaceful international order.

As we grapple with these global challenges, the resonance with the Arab world is unmistakable. The region, with its dynamic economic sectors and robust banking institutions, stands at the confluence of these complex dynamics. The interdependence of global economic networks, the strategic alliances shaping regional dynamics, and the delicate equilibrium between economic growth and security considerations mirror the nuanced challenges faced by Arab leaders, policymakers, and business luminaries.

In summary, as the global arena becomes increasingly adversarial, the call for a refined economic-security agenda resonates profoundly with the Arab world. Leaders in the region should chart a course that fosters resilience amidst geopolitical uncertainties, strategically strengthens economic ties, and deftly balances the pursuit of prosperity with robust security measures. In this intricate dance, the Arab banking and economic sectors emerge as pivotal pillars, guiding the region toward a future characterized by stability, prosperity, and diplomatic finesse

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