Lagarde Addresses Systemic Risks in Frankfurt
Christine Lagarde, President of the European Central Bank (ECB) and Chair of the European Systemic Risk Board (ESRB), delivered a speech in Frankfurt on Wednesday highlighting the dual nature of artificial intelligence adoption within the financial sector. While acknowledging widespread industry uptake, Lagarde stated that the growth of AI is testing regulators’ ability to monitor risks that can build up across multiple institutions.
The warning comes as European financial institutions accelerate their integration of advanced technologies. According to data cited by the ECB chief, nearly nine in ten significant euro area banks are already using generative artificial intelligence. A recent survey found that seven in ten EU securities market firms expect to increase their investment in AI.
Autonomous Systems and Market Volatility
Lagarde noted that most current uses of AI involve limited autonomy. However, she stated that “AI agents”—systems capable of pursuing a goal with limited human direction—are beginning to take on more discretion in areas such as trading strategies and identifying weaknesses in systems that trading depends on.
The ESRB’s Advisory Scientific Committee has warned that if many firms rely on similar AI models, they could react in the same way to shocks and reinforce price moves. This potential for synchronized reactions presents a specific challenge to market stability.
Despite the rapid adoption of generative tools, Lagarde cited data indicating that use of more autonomous “agentic” AI remains limited. A survey conducted this year found that 5% of asset managers gave AI autonomous or semi-autonomous authority over investment recommendations or trades.
Cited Risk Factors
In her address, Lagarde cited trading, cyberattacks, and geopolitics as relevant risk factors associated with the expanding role of artificial intelligence in finance. Regulators have warned that the technology could create new risks for markets, cyber security, and the wider financial system.
Lagarde also cited research regarding an AI model during her speech, though specific details of this research were not fully detailed in the available reports.