The President of the European Central Bank (ECB), Christine Lagarde, stated that new technologies such as artificial intelligence pose potential risks and lead to new vulnerabilities in the financial system. Lagarde spoke at the annual conference of the European Systemic Risk Board in Frankfurt, Germany. Highlighting that major structural transformations like geopolitical changes, climate, and technological advancements have set new boundaries in macroprudential policy, Lagarde explained that these have not yet fully reflected in existing frameworks but significantly impact financial stability. She emphasized the need for macroprudential policy to adopt and utilize the innovations brought by these new technologies effectively to mitigate risks created by them. Lagarde expressed concerns regarding various unaddressed issues in the field of crypto assets such as weak foundations, questionable governance, and ineffective verification methods. Stating that “Artificial intelligence could be the most transformative for the financial system,” Lagarde reminded that analytical models of AI designed for specific tasks assist financial institutions in fraud detection, credit assessment, and predicting portfolio returns. She noted that recent advancements in productive artificial intelligence, growth in computing power, and comprehensive data access enable rapid adoption of AI in various fields.

“NEW TECHNOLOGIES ALWAYS TEND TO CARRY POTENTIAL RISKS” Lagarde evaluated, “Although new technologies provide enormous benefits to the financial system over time, they always tend to carry potential risks.” Describing how the latest AI models and emerging technologies like quantum computing have the potential to deeply impact economies and financial systems, Lagarde stated, “The financial sector will find numerous ways to utilize AI to enhance current operations. Yet, relying on increasingly complex technologies creates new vulnerabilities in our financial system.” Lagarde mentioned that the widespread adoption of artificial intelligence could also have systemic effects on the financial system and highlighted that developments in quantum computing could pose a serious threat to encryption-based financial systems.