Developed by a team at UCL and Queen Mary University of London, the tool assesses not only if a bailout is the best strategy for taxpayers, but also how much should be invested in the bank and which bank or banks should be bailed out at any given time.
The algorithm was tested using data from the European Banking Authority on a network of 35 European financial institutions judged to be the most important to the global financial system.
Dr Neofytos Rodosthenous, corresponding author of the paper, said: “Government bank bailouts are complex decisions that have financial, social and political implications. We believe the AI approach we have developed can be an important tool for governments, helping 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. Our techniques are freely available for banking authorities to use...