Global financial regulators are increasing their oversight of artificial intelligence risks as banks and other financial institutions accelerate their adoption of AI technologies. Regulators worldwide have voiced concerns about the potential impact of AI on financial stability, despite optimism from banks regarding productivity gains. The G20’s Financial Stability Board (FSB), a risk watchdog, released a report on Friday highlighting the dangers of institutions overly relying on the same AI models and specialised hardware, which could lead to herd-like behaviour.
The FSB report stated that this heavy reliance could create vulnerabilities due to the lack of available alternatives. Echoing these concerns, the Bank for International Settlements (BIS), a central bank umbrella group, published a separate study stressing the urgent need for central banks, financial regulators, and supervisory authorities to enhance their capabilities concerning AI. The BIS emphasised the necessity for these bodies to become more informed observers and users of the technology itself.
While the FSB report acknowledged AI’s potential to amplify market stress, it noted limited empirical evidence of AI-driven market correlations affecting market outcomes thus far. However, the report also flagged the heightened risk of AI-related cyberattacks and AI-driven fraud facing financial institutions. These concerns arise amidst a global race, particularly between the United States and China, to lead the development of machine-learning technologies.
Some regions have already initiated AI regulation efforts, notably the European Union, whose Digital Operational Resilience Act (DORA) took effect in January. This act represents one of the first steps taken by global governing bodies to keep the risks from AI at bay, and ensure financial security is maintained.
