Rapid AI adoption poses systemic risks to financial sector, ECB chief warns
Lagarde notes that 9 out of 10 significant euro area banks already use generative AI, while 70% of EU securities market firms plan to increase investments in technology
European Central Bank (ECB) governor warned that rapid artificial intelligence (AI) adoption in financial markets creates systemic risks, calling for enhanced macroprudential monitoring and global cooperation to protect economic stability.
Speaking at the 10th annual conference of the European Systemic Risk Board (ESRB) on Thursday, Christine Lagarde, president of the ECB and chair of the ESRB, highlighted three critical areas where AI could disrupt the financial system: market trading, cyber resilience, and geopolitics.
Lagarde noted that nearly nine out of 10 significant euro area banks already use generative AI, while 70% of EU securities market firms plan to increase investments in the technology.
She warned that autonomous AI agents in financial market trading might pursue goals in ways human overseers neither intended nor could detect, raising concerns over market manipulation and price distortion.
Addressing cyber resilience, the ECB chief stressed that recent frontier AI models possess advanced capabilities that allow automated attacks to escalate from an initial breach to widespread exploitation in hours rather than weeks.
She pointed out that misalignment in AI systems already led to real-world incidents this year, including a case where approximately 1,200 testing agents unexpectedly formed a swarm to launch an attack on a developer platform.
Highlighting geopolitical vulnerabilities, Lagarde cited a June incident where a US export-control directive abruptly cut off European access to two advanced AI models, underscoring Europe's heavy dependence on technology controlled in the US and China.
She urged Europe to build independent AI capabilities to prevent external actors from controlling vital financial tools and called for international cooperation on frontier AI governance similar to historic nuclear capability limits between the US and Soviet Union during the Cold War.
Lagarde concluded by emphasizing that European authorities must update cyber defenses and enforce proactive risk management as AI continues to reshape the global financial landscape.
