Building Trust in Transition

Abstract

This study attempts to look into the ethical issues involved in AI integration in Nepal’s capital markets, which have unique characteristics of the market structure, including a herd-prone retail sector, behavioral herding, and underdeveloped technological infrastructure. By conducting theoretical and policy-based analyses that will integrate Nepal's AI policy, NRB guidelines, OECD guidelines, and EU AI Act, we formulate the Nepal Ethical Capital Market AI (NECMA) framework based on the Technology-Organization-Environment (TOE) framework. The paper finds that ethical governance is more than compliance; rather, it is a pre-requisite for the sustainable development of the financial sector in emerging economies. It is shown that the specific structural vulnerabilities of Nepal call for a sequential technology, environment, organization, and ethics filter.