The European Central Bank (ECB) is delving into the risks faced by banks in the region from the artificial intelligence (AI) industry, amid heightened concern over hidden credit exposures and financial sector disruption.
The Frankfurt-based central bank is asking a small number of individual lenders for more details on their lending to areas including data centers, people familiar with the effort said.
It is also running targeted workshops to identify how banks are using generative AI, said the people, who asked not to be named.
Photo: AFP
Increased attention by the ECB to AI risks underlines how global regulators are aware of the potential for the technology to upend the banking sector, from transforming the business of investment advice to managing its historic need for financing. Banks and private credit firms globally have been pouring trillions of dollars into the AI buildout, which spans development companies to data centers and energy supply.
The workshops focus on aspects such as business models, governance and risk management.
At least one lender understood the ECB’s attention to signal the need for caution on lending to sectors such as data centers, one of the people said.
The ECB last year said the way banks use AI applications would be a priority for its bank supervisors from this year to 2028 and that it would run workshops on the topic.
More broadly, the ECB and other authorities have expanded efforts to ask banks about their dependence on technology companies, other people familiar with the matter said.
That includes questions about what they would do if a cloud service provider or data center was no longer available at short notice, the people added.
Data recovery and backups are especially relevant here, they said.
AI adoption would expose European lenders to even greater systemic threats from their reliance on foreign tech giants, the Netherlands’ top financial regulator said last year.
Another banker said their firm is working on mapping its exposures to AI firms.
That is complex, because they have to consider not only loans to AI firms and data centers, but also other links such as those to their electricity suppliers, they said.
This month, stocks of firms offering wealth management services sold off as investors worried that large parts of the industry could be automated in the future.
Other companies, including those in insurance and software, have seen their shares plummet this month due to speculation around the perceived threat AI poses.
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