Global financial watchdogs are stepping up efforts to keep a close eye on the risks linked to artificial intelligence as banks and financial firms increasingly embrace AI technologies. While many in the banking world see AI as a way to boost productivity, regulators are worried about potential threats to financial stability.
The Financial Stability Board (FSB), which watches over risks for the G20 nations, recently warned that if too many institutions rely on the same AI models and hardware, it could cause everyone to move in the same direction—a phenomenon known as “herd-like behavior.” This kind of dependence might create weak spots if alternatives aren’t available.
Meanwhile, the Bank for International Settlements (BIS), a central bank group, says regulators and supervisors must improve their skills around AI. They need to be better at spotting how new technologies affect the financial system and at using AI themselves.
Countries like the U.S. and China are in a race to lead the AI field, pushing ahead with new machine learning tools. The FSB report notes AI could make markets more unstable during stressful times, but so far, there’s little proof that AI-driven market activity is changing market results. Still, there’s concern about AI-related cyberattacks and fraud targeting financial institutions.
Some areas have already started setting rules for AI. The European Union, for example, introduced the Digital Operational Resilience Act (DORA) this January, aiming to make financial systems tougher against digital risks.
As AI becomes a bigger part of finance, regulators want to make sure they keep pace and manage new dangers before they grow.