President of the European Central Bank (ECB) Christine Lagarde warned that artificial intelligence (AI) poses a significant risk to financial stability and could potentially lead to dangerous financial crises. She made this statement during a speech in Venice on Wednesday.
According to Lagarde, the ECB is firmly committed to preventing such crises, although stopping AI, even with robust regulation, is impossible. She emphasized that the real risk lies not in AI itself, but in the shocks it could potentially cause. In recent history, financial crises have destroyed more jobs and savings than any technology.
ECB Measures and Global Governance
As AI systems become increasingly powerful and expand within the economy, the main question today, according to Lagarde, is to understand what this new technology could mean for financial stability and how to protect citizens and businesses from its impact. The ECB has already subjected 109 banks to a scenario of a severe cyberattack, and most identified vulnerabilities have been addressed.
Officials will now reach out to bank leaders to ensure they are prepared and resilient against potential AI attacks, which will require significant investments. Lagarde noted that AI intends to reshape the financial sector from within, creating new concentrations of risk and new opportunities for those looking to cause harm.
She called for some form of global governance for AI, similar to non-proliferation agreements that kept the world safe during the height of the Cold War. In Europe, it is vital to act swiftly to enhance the resilience of banks and businesses, as well as to ensure a union of capital markets and thorough oversight. The ECB can best serve the people of Europe by ensuring that this technological revolution does not turn into a financial crisis.
The ECB recommends that banks invest more in AI to counter cyber risks. However, as stated by Olli Rehn, another ECB representative, the bank currently cannot factor AI into its monetary policy.
Source: Bloomberg