The Financial Stability Board (FSB) released a report examining the increasing adoption of artificial intelligence (AI) in finance and its implications for financial stability.
While AI is primarily used by financial firms to improve operations and regulatory compliance, generative AI (GenAI) technologies, such as large language models, are driving new applications like document summarization, information retrieval, and code generation. Despite cautious adoption by financial institutions, GenAI’s accessibility is accelerating its integration into financial services.
Financial authorities are also employing AI for more efficient supervision. However, challenges include the rapid pace of AI innovation, limited data on AI usage, and difficulties in monitoring vulnerabilities and risks to financial stability. While AI enhances efficiency, compliance, and personalization in financial services, it also raises systemic risks, including dependency on third-party providers, market correlations, cyber threats, model risk, data governance issues, and potential for financial fraud and disinformation. Misaligned AI systems could further exacerbate these risks and affect market structures, macroeconomic conditions, and energy use.
The report highlights that existing regulatory frameworks address many AI-related vulnerabilities but may require enhancement. It recommends that the FSB, standard-setting bodies, and national authorities: (i) address data gaps for better monitoring of AI adoption and risks; (ii) evaluate the sufficiency of current policy frameworks; and (iii) improve regulatory and supervisory capabilities through cross-border collaboration and AI-powered tools.
