Global Regulators Focus on AI Risks in Finance

LONDON – Financial regulators around the world are looking to enhance their scrutiny of artificial intelligence (AI) as its adoption increases across the banking sector and other financial institutions.

While banks are generally optimistic that AI will boost productivity, there’s a growing concern among global regulators regarding its implications for financial stability.

The Financial Stability Board (FSB), which oversees risks for the G20, released a report indicating that a widespread reliance on similar AI models and specialized hardware could instigate herd behavior among institutions.

The FSB commented, “This heavy reliance can create vulnerabilities if there are few alternatives available.”

Moreover, a study from the Bank for International Settlements (BIS) stressed the “urgent need” for central banks and financial regulators to enhance their understanding and utilization of AI technologies.

The BIS emphasized the importance of upgrading capabilities—not just to observe the impacts of technological advancements, but also to actively engage with the technology.

Countries like the United States and China are currently vying for leadership in developing advanced machine-learning technologies.

The FSB report highlighted that although AI could increase market stress, there’s currently “little empirical evidence that AI-driven market correlations affect market outcomes.”

However, it also warned that financial institutions may face a rising threat from AI-related cyberattacks and fraud.

Some regions have started to implement AI regulations, with the European Union already moving forward with its Digital Operational Resilience Act (DORA), which took effect in January.