Global financial regulators are intensifying scrutiny of artificial intelligence (AI) adoption in banking and financial markets amid growing concerns over systemic vulnerabilities. A Financial Stability Board (FSB) report warns that widespread reliance on identical AI models and specialized hardware could trigger herd behavior, amplifying risks during market disruptions.
“This heavy reliance can create vulnerabilities if there are few alternatives available,” the FSB stated, urging coordinated monitoring to safeguard financial stability. The warning comes as institutions increasingly deploy AI for trading, risk assessment, and customer service.
In a parallel development, the Bank for International Settlements (BIS) called for central banks and regulators to urgently enhance their AI expertise. “There is a need to upgrade their capabilities both as informed observers of technological advancements and as users of the technology itself,” the BIS emphasized, highlighting AI’s potential to reshape market dynamics and regulatory frameworks.
Analysts suggest these moves reflect a broader shift toward preemptive risk management as AI integration accelerates across Asia’s rapidly digitizing financial hubs, from Singapore to Shanghai.
