On 14 November 2024, the Financial Stability Board (FSB) issued a report on the financial stability implications of artificial intelligence (AI).

High-level overview

The report provides a high-level overview of recent developments in AI, along with an assessment of their potential financial stability implications. It revisits the 2017 FSB report on AI in financial services (2017 FSB report) and takes stock of the latest advancements, exploring current use cases in the financial sector and drivers of adoption, as well as new potential benefits and AI-related financial sector vulnerabilities.

The report is structured as follows:

  • Section 2 reviews developments since the 2017 FSB report, providing context to the technological advancements and taking into consideration supply and demand-side drivers.
  • Section 3 discusses selected AI use cases by industry participants and official sector authorities.
  • Section 4 discusses implications for financial stability, focusing on how AI could amplify specific types of financial sector vulnerabilities.
  • Section 5 concludes by discussing policy implications.
  • Annex 1 discusses the large language model (LLM) supply chain.

Observations

The report makes a number of observations including:

  • The use of AI in financial services could amplify certain financial vulnerabilities with potential implications for financial stability. Factors such as a wider uptake of powerful and complex AI methods, novel characteristics of LLMs and GenAI, greater importance of specialised hardware and infrastructure services, and increasing usage of unstructured and opaque data sources have increased the potential systemic impact of AI usage in finance.
  • Financial authorities face two key challenges for effective vulnerabilities surveillance: the speed of AI change and the lack of data on AI usage in the financial sector. Existing regulatory and supervisory frameworks already require financial institutions to address cyber and operational risks, as well as to manage model and third-party risks. However, AI developments could raise other issues that may require policy consideration. For example, some authorities have adopted or are considering AI-specific guidance to address issues that may go beyond the scope of existing regulations.
  • The FSB, standard setting bodies and national authorities may wish to:
  • consider ways to address data and information gaps in monitoring developments in AI use in the financial system and assessing their financial stability implications. For example, authorities could consider leveraging periodic and ad-hoc surveys on AI adoption and use cases;
  • assess whether current regulatory and supervisory frameworks adequately address the vulnerabilities identified in the report, both domestically and internationally; and
  • consider ways to enhance regulatory and supervisory capabilities for overseeing the policy frameworks related to the application of AI in finance. This may for instance be achieved through international and cross-sectoral coordination.