Global regulators plan closer watch on AI risks in finance
A report by the Financial Stability Board (FSB), released on October 10, warns of AI risks to banking and financial markets.
According to the FSB, supervisors should focus on concentration risks from a few dominant AI tools or service providers and ensure firms maintain oversight over outsourced models.
FSB experts note that vulnerabilities in the generative AI supply chain will vary depending on how financial institutions use the technology and the level of dominance among leading AI service providers. They caution that as banks increasingly embed AI into core operations, reliance on just a few major providers could make any technical or operational failure ripple across the wider financial system.
The FSB called for closer cooperation among regulators to share data on AI incidents, set common standards, and test tools that detect model errors or bias in real time.
FSB experts note that vulnerabilities in the generative AI supply chain will vary depending on how financial institutions use the technology and the level of dominance among leading AI service providers. They caution that as banks increasingly embed AI into core operations, reliance on just a few major providers could make any technical or operational failure ripple across the wider financial system.
High levels of concentration in the AI supply chain could limit substitutability given the small number of alternative service providers in the market and thus amplify vulnerabilities,the report said.
The report points out that the rise of powerful, lower-cost open-weight AI models such as DeepSeek’s R1 could disrupt the current development model built around massive investment and heavy computing power. These alternatives may make advanced AI more accessible to smaller organisations and reduce reliance on a handful of large providers, helping to reduce concentration risks.
The FSB called for closer cooperation among regulators to share data on AI incidents, set common standards, and test tools that detect model errors or bias in real time.
A related study by the Bank for International Settlements, prepared for G20 finance ministers and central bank governors, also urged monetary and supervisory authorities to strengthen their technical knowledge and modernise oversight tools for AI systems.
Warnings over concentration have been growing. The Bank of England recently cautioned that dominance by a few major AI-focused technology companies could make stock markets more fragile, noting that a shift in sentiment toward the sector could spark a sudden correction.
Bloomberg recently pointed to circular investment patterns in the AI industry, highlighted how valuations such as OpenAI’s $500 billion figure are supported by Microsoft’s $3.9 trillion market value and its multibillion-dollar purchases of Nvidia and AMD chips - a feedback loop that inflates the sector without immediate profits.
Warnings over concentration have been growing. The Bank of England recently cautioned that dominance by a few major AI-focused technology companies could make stock markets more fragile, noting that a shift in sentiment toward the sector could spark a sudden correction.
Bloomberg recently pointed to circular investment patterns in the AI industry, highlighted how valuations such as OpenAI’s $500 billion figure are supported by Microsoft’s $3.9 trillion market value and its multibillion-dollar purchases of Nvidia and AMD chips - a feedback loop that inflates the sector without immediate profits.
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