New Zealand central bank warns of AI risks
Growing reliance on a few AI providers may heighten financial contagion risks and create new cyber vulnerabilities, says the Reserve Bank of New Zealand.
The Reserve Bank of New Zealand has warned that the swift uptake of AI in the financial sector could pose a threat to financial stability.
A report released on Monday highlighted how errors in AI systems, data privacy breaches and potential market distortions might magnify existing vulnerabilities instead of simply streamlining operations.
The central bank also expressed concern over the increasing dependence on a handful of third-party AI providers, which could lead to market concentration instead of healthy competition.
A reliance like this, it said, could create new avenues for systemic risk and make the financial system more susceptible to cyber-attacks.
Despite the caution, the report acknowledged that AI is bringing tangible advantages, such as greater modelling accuracy, improved risk management and increased productivity. It also noted that AI could help strengthen cyber resilience rather than weaken it.
The analysis was published just ahead of the central bank’s twice-yearly Financial Stability Report, scheduled for release on Wednesday.
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