The Reserve Bank of New Zealand has cautioned about the rapid integration of artificial intelligence in financial services, highlighting potential risks to financial stability. While AI can improve productivity, accuracy, and resilience, it also poses risks such as system errors, data privacy concerns, and market distortions.
The growing dependence on a few major third-party AI providers raises concerns about market concentration, increasing the potential impact of cyberattacks. According to Kerry Watt, Reserve Bank of New Zealand director of Financial Stability Assessment & Strategy, "There is still considerable uncertainty around how AI will shape the financial system."
AI's potential benefits include boosting productivity, enhancing risk assessment, improving modeling accuracy, and strengthening cyber defenses across financial institutions. However, regulated entities are expected to manage AI-related risks within existing frameworks, and regulations must evolve to keep pace with technological change.
The Reserve Bank of New Zealand will continue monitoring AI developments and regulatory responses to ensure the financial system remains robust in the face of innovation. As AI technology advances, the bank emphasizes the need for vigilant monitoring and adaptation to shield against evolving threats.
