Banking regulators around the world are increasing their efforts to contain the risks posed by AI to global financial stability, Reuters has reported.

Citing people familiar with the matter, the newswire revealed that regulators including the Federal Reserve in the US, the Bank of England (BoE) and European Central Bank (ECB) are probing banks’ use of AI, and their readiness for attacks stemming from the technology.

In the US, questions include whether banks are using Chinese AI models AI agents in cyber defence and if they can control increasingly autonomous AI systems, the people told Reuters.

Two other US regulators, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, are also questioning banks, the newswire added. The three are investigating what safeguards exist to prevent agents from exceeding their authority, the auditability of these systems and whether humans remain involved in decision-making, the people said.

The inquiries are taking both written and verbal forms and going to banks of all sizes. The people added that regulators in the US are still gathering information and not yet being prescriptive about actions taken by individual banks.

In Europe, the focus is on recovery, with both the BoE and the ECB concerned that AI’s rapid advance could create serious harm and disruption in financial markets sooner than previously feared, people told Reuters.

A senior executive at a large European bank told the agency that they were also worried about potentially major damage to banking and financial markets within six months.

In the UK, the BoE is separately encouraging the country’s largest lenders to examine bare-metal recovery plans, people told Reuters. These systems are entirely independent of a bank’s main tech setup and can kick in if the primary operating systems are compromised.

However, the people added, building and maintaining these systems is expensive. Rather than introduce new requirements, UK authorities intend to work collaboratively with industry, they added.

Two weeks ago, the BoE warned that debt linked to AI, along with security concerns surrounding the technology, pose a risk to UK financial stability.

The threat of AI-powered cyber attacks on banks was brough into sharp focus last month, when a Chinese hacker used the technology to steal large amounts of consumer data from some of South Korea’s largest banks.

---