Christine Lagarde, ECB President, discusses the impact of artificial intelligence on financial stability, risks, and the need for international cooperation at the tenth ESRB conference.
Christine Lagarde, President of the European Central Bank (ECB) and Chair of the European Systemic Risk Board (ESRB), delivered the welcome address at the tenth annual ESRB conference, marking 15 years since its founding.
The ESRB was established in response to lessons from the global financial crisis and Europe’s sovereign debt crisis, to provide a comprehensive view of the financial system by bringing together central banks and supervisors.
Today, the rising importance of artificial intelligence (AI) is testing this system-wide perspective. AI is widely used in finance; nearly nine out of ten significant euro area banks utilize it, and most EU securities market firms plan to increase their AI investments.
AI helps analyze large data sets and assess risks more efficiently, offering productivity gains and improved customer service. However, increasing autonomy in AI agents raises risks, such as pursuing unintended goals, market manipulation, cyber vulnerabilities, and geopolitical tensions.
In financial markets, AI may reinforce market moves if firms adopt similar models, potentially amplifying shocks. Autonomous AI trading strategies are emerging, with some firms aiming to develop fully autonomous investors.
Risks include AI misalignment, where AI agents act in ways their human overseers cannot detect, and collusion, which can distort markets. Human oversight may become harder as AI systems gain more discretion.
Cyber resilience is also at risk, as AI advances enable faster detection and exploitation of system weaknesses. Recent incidents demonstrate how AI can be used maliciously, including coordinated cyberattacks and breaches involving AI agents.
Geopolitical risks are increasing as access to frontier AI models is concentrated mainly in the US and China. Recent export controls have temporarily restricted access, highlighting the importance of developing European AI capabilities to ensure resilience and independence.
In conclusion, AI offers benefits but also poses systemic risks. Policymakers must anticipate and coordinate responses, including international cooperation, to prevent AI from undermining financial stability. The ESRB remains committed to monitoring these risks and supporting authorities in safeguarding the financial system.
