The International Monetary Fund (IMF) has called on central banks and financial regulators to strengthen governance frameworks for artificial intelligence (AI), warning that the technology’s growing role in the financial sector could create systemic risks if oversight does not keep pace with innovation.
The call was made by the IMF’s Financial Counsellor and Director of the Monetary and Capital Markets Department, Tobias Adrian, in a blog post examining the increasing influence of AI on financial markets, lending, risk management and regulatory supervision.
According to Adrian, AI is now widely used to assess financial risks, approve credit, execute market trades and support supervisory functions across the financial system.
He said while the technology has improved efficiency and expanded financial services, it has also introduced new vulnerabilities that require stronger regulatory attention.
Adrian outlined three key priorities for policymakers to address the emerging risks.
These include strengthening oversight of AI-powered trading platforms, lending systems and supervisory technologies, improving transparency around AI models and investment strategies, and enhancing cross-border cooperation to boost cybersecurity and operational resilience.
He explained that AI has significantly accelerated financial activities, enabling lending decisions, trading operations and supervisory analysis to be completed almost instantly.
Although this has improved market efficiency, Adrian warned that it has also increased the speed at which financial shocks could spread across institutions and markets.
He noted that AI-driven trading has enhanced market liquidity, lowered transaction costs and improved price discovery under normal market conditions.
Similarly, AI-powered lending systems have expanded access to credit, strengthened fraud detection and improved borrower assessments by using alternative data sources, particularly for consumers and small businesses.
Despite these benefits, Adrian cautioned that widespread reliance on similar AI models could increase financial instability during periods of market stress.
He said financial institutions using comparable algorithms may respond simultaneously to the same market signals, amplifying price movements and increasing market volatility.
Citing IMF research, Adrian noted that some AI-managed investment funds adjust their portfolios much faster than conventional funds, raising the risk of synchronised trading that could intensify market disruptions.
He warned that future financial crises may be triggered not by programming errors but by multiple AI systems independently reaching similar conclusions and executing comparable investment strategies at the same time.
To reduce these risks, Adrian urged regulators to strengthen stress-testing frameworks, improve oversight of AI-driven investment strategies and collect more detailed information on AI adoption, model dependencies and financial market exposures.
He said stronger governance and proactive regulatory measures would help ensure that the benefits of artificial intelligence are realised without undermining financial stability.
