The Bank of Canada is warning that artificial intelligence may become a source of systemic risk, not just a productivity gain for banks. Governor Tiff Macklem said firms are embedding AI into trading, compliance, fraud detection, credit scoring and customer service, but the same tools could also make markets move faster and more uniformly when stress hits.
From Efficiency Tool to Macro Risk
Macklem’s concern is straightforward: if commercial banks and other financial institutions rely on similar models, similar data sets and the same cloud or AI providers, they may also react to shocks in similar ways. That could reduce the diversity of market responses that normally helps absorb volatility, while tightening the link between financial stability and a handful of large technology vendors.
Why Central Banks Are Paying Attention
The warning shows how the AI debate is shifting from ethics and workplace productivity toward capital-markets plumbing and operational resilience. The Financial Stability Board sharpened that case in its Nov. 14, 2024 report, “The Financial Stability Implications of Artificial Intelligence,” warning that common models, data and third-party providers could increase herding and procyclicality across the financial system.
That concern is no longer theoretical. A Bank of England and Financial Conduct Authority survey published in April 2024 found 75% of respondent financial firms were already using AI, up from 58% in 2022, while also highlighting concentration risk around a small number of external technology providers.
For investors, the message is that generative AI is now colliding with the post-crisis regulatory instinct to spot concentration risk before it becomes a market event. For supervisors, the challenge is not only model accuracy, but whether automated decision loops can turn a selloff into a faster, more correlated shock.