Nasdaq Uses AI to Enhance Risk Assessment for Banks and Insurers

Nasdaq has introduced new machine learning technology to enhance the way investment portfolio risks are calculated. The new functionality, announced on Oct. 17, will be integrated into Nasdaq’s Calypso platform, which is used by banks, insurers, and financial institutions to manage capital markets, handle risk, and meet regulatory reporting requirements.

According to Nasdaq, its machine learning capabilities are combined with advanced mathematical modeling to streamline complex trading and regulatory risk assessments. This new approach allows for faster processing—up to 100 times quicker than traditional methods—while maintaining high accuracy. The technology also reduces the need for extensive physical infrastructure to run these calculations.

Gil Guillaumey, head of Nasdaq’s capital markets technology, explained that financial institutions trading over-the-counter (OTC) derivatives face increasingly complex calculations due to regulatory demands and internal risk controls.

“Maintaining the necessary infrastructure and systems can be outrageously expensive, inefficient, and increasingly impractical regardless of cloud elasticity strategies,” Guillaumey said. “The sheer scale of computing power required to meet the most demanding regulations, alongside the strategic benefits of more accurate real-time analytics, is driving a profound rethink about how we can leverage AI to reduce the cost of compliance.”

The new AI-driven system aims to help financial institutions overcome these challenges, enabling more accurate and efficient real-time analytics for managing risk and compliance.

AI’s Expanding Role in Compliance and Risk Management

This development comes as banks are increasingly relying on AI to reduce regulatory burdens and streamline compliance efforts. Leslie Watson-Stracener, managing director and regulatory compliance capability leader at Grant Thornton Advisors LLC, noted that AI can improve the efficiency and accuracy of regulatory testing and monitoring.

“The regulatory burden and cost to comply is only growing, which leaves banks doing more testing and monitoring with the same amount of resources,” Watson-Stracener wrote in a recent blog post. She added that overworked compliance teams can experience stress, burnout, and increased chances of human error.

Wes Luckock, senior manager of advisory services at Grant Thornton, predicted that AI’s role in financial operations will continue to grow: “Across the business cycle, AI will be coming into play in an end-to-end manner. It’s not just going to be a couple tasks throughout the cycle — it’s going to be the entire cycle.”

Despite the benefits, experts caution that human oversight remains essential. “Always make sure your board has oversight of your AI practices. And test your results,” Watson-Stracener advised.

What This Means

Nasdaq’s integration of AI into its Calypso platform represents a significant shift in how financial institutions manage risk and compliance. With AI enabling faster, more accurate calculations, banks and insurers can reduce infrastructure costs and meet increasingly complex regulatory demands. However, as AI takes on a more central role, human oversight will remain critical to ensure accountability and avoid unintended consequences.