RBA warns AI boom poses risk to financial stability
4▲0 ▼0Impact / 5
The Reserve Bank of Australia, or RBA, released its half-yearly Financial Stability Review on Thursday, October 1, warning that the rapid development and deployment of artificial intelligence could pose risks to financial stability. It said advances in AI capabilities, combined with broader technological developments, have lowered the cost and technical expertise needed to carry out sophisticated cyberattacks on financial institutions and financial market infrastructure. The report said that before AI's potential to support productivity growth is fully realised, rapid advances in AI could intensify the cyber threat landscape and increase risks to operational vulnerabilities. In addition, AI-related investment and financing could create vulnerabilities for financial stability if the scale and pace of investment continue to grow over the coming years, with AI-related companies increasingly turning to debt to fund very large projects and off-balance-sheet financing through special purpose vehicles, or SPVs, becoming a primary method of raising funds for large AI infrastructure projects. At the same time, large amounts of external financing for AI-related investment could increase credit risk for banks, bond markets, private credit and other institutional investors if returns fall short of expectations. Several AI investment trends could lead to losses among lenders and investors.