Banking watchdogs ramp up AI scrutiny as stability fears mount, sources say

The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation are asking banks about their use of advanced AI, including autonomous agents in cybersecurity and safeguards to limit, monitor and audit their actions. Regulators are gathering information from banks of different sizes and have not yet prescribed what lenders should do.

British supervisors are encouraging the largest banks to examine independent “bare metal” recovery systems that could be used if primary operating systems are compromised. The ECB set an end-October deadline for lenders to produce plans addressing AI-enabled cyber threats, including improved backup and recovery.

Supervisors are also examining banks’ use of frontier AI, third-party dependencies and ability to shut down and restart systems in a controlled manner. A senior executive at a large European bank said they were worried about potentially major damage to banking and financial markets “within six months.”