FSB Warns Financial Sector Is Unprepared for Advanced AI Risks

FSB AI financial risks are increasing as advanced artificial intelligence changes the speed, scale and cost of cyberattacks, Financial Stability Board Chair Andrew Bailey has warned.

In a letter to G20 finance ministers and central bank governors, Bailey said many jurisdictions lacked sufficiently developed systems to manage the deployment of advanced AI.

He identified AI-driven cyber threats as the most immediate concern, warning that financial institutions’ dependence on a relatively small number of technology providers could create operational vulnerabilities and weaken market confidence.

Regulators are also concerned that AI could accelerate the discovery and exploitation of cybersecurity weaknesses, forcing institutions to deploy security updates faster while placing additional pressure on testing, resilience and recovery procedures.

Bailey also highlighted stretched AI-related asset valuations, vulnerabilities in government debt markets and rising leverage in equity markets as wider risks to global financial stability.