Banking Regulators Step Up AI Scrutiny Over Financial Stability Fears

US Regulators Quiz Banks on AI Use

Three top US regulators, including the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, are quizzing banks about their use of advanced AI models. Questions cover whether lenders deploy Chinese-developed technology, use AI agents in cyber defence and can control increasingly autonomous systems. The inquiries focus on limits placed on agentic systems, how their actions are monitored and approved, whether banks can clearly track and audit AI agent decisions, what safeguards prevent agents from exceeding their authority, and how autonomous systems can be shut down. Regulators are still gathering information and are not yet being prescriptive about what lenders should do.

European Supervisors Press for Recovery Plans

In Europe, supervisors including the Bank of England and the European Central Bank are pressing banks to improve recovery plans, concerned that rapid advances in AI could cause serious harm and disruption in financial markets sooner than previously feared. UK authorities are separately encouraging the largest banks to examine bare metal recovery systems, which are entirely independent from a bank's main tech set-up and can kick in if primary operating systems are compromised. Building and maintaining such recovery is expensive, and UK authorities intend to work collaboratively with industry rather than introduce new requirements. The ECB in July gave lenders an end-October deadline to produce plans to counter AI-enabled cyber threats, including improved back-up and recovery.

Industry Warnings and Recent Incidents

The intensified scrutiny follows recent incidents and industry warnings. US cybersecurity company CrowdStrike said this month a person in China likely used a Chinese-developed AI agent and Anthropic's Claude Code in a hack on South Korean banks, while rogue AI agents developed by OpenAI were involved in a breach of AI platform Hugging Face. Anthropic researchers have warned that increasingly powerful AI systems could eventually escape human control, prompting calls for stricter regulation. JPMorgan CEO Jamie Dimon has urged corporate leaders to join a US-focused industry group to address AI risks. The IMF on Tuesday warned against complacency in global financial markets, saying a major cyberattack affecting a critical service or financial institution could undermine confidence and calling on policymakers to boost cybersecurity capacity. "The adoption of AI is often outpacing the ability to put the controls in place," said Michael Woodbridge, London-based cybersecurity partner at Grant Thornton.

Sources: Global Banking & Finance · Reuters