The Reserve Bank of New Zealand (RBNZ) has issued a warning about the potential threats to financial stability posed by the rapid adoption of artificial intelligence (AI) in financial services. In a report released ahead of its biannual Financial Stability Report, the central bank expressed concerns regarding system errors, data privacy issues, and market distortions that could arise from AI implementation.
According to the RBNZ, “Errors in AI systems, data privacy concerns and market distortions could amplify existing risks.” The bank also noted that the increasing reliance on a few major third-party AI providers could lead to market concentration, new contagion risks, and increased vulnerability to cyberattacks.
Despite these risks, the RBNZ acknowledged the benefits of AI, including increased productivity, more accurate modeling, improved risk assessment, and enhanced cyber resilience. Kerry Watt, the RBNZ’s director of financial stability assessment and strategy, emphasized the need for vigilance, stating, “There is considerable uncertainty around how AI will shape the financial system. We will continue to closely monitor developments to ensure the system remains well-positioned to manage emerging risks.”
The RBNZ’s warning underscores the complex relationship between AI adoption and financial stability, highlighting both the potential benefits and risks associated with this emerging technology.
