Source: Reserve Bank of New Zealand
As AI tools and models become increasingly sophisticated and widely integrated across the financial services sector, they offer significant potential benefits. These include improved productivity, greater modelling accuracy, enhanced risk assessment capabilities, and strengthened cyber resilience – helping financial institutions better detect and manage threats.
Alongside these opportunities lie potential vulnerabilities. Errors in AI systems, data privacy concerns and market distortions could amplify existing risks. The growing reliance on a small number of third-party AI providers may also contribute to market concentration, creating new channels for contagion and increasing the potential impact of cyber-attacks.
“There is still considerable uncertainty around how AI will shape the financial system,” said Kerry Watt, Director of Financial Stability Assessment & Strategy. “While its impact could be positive, especially in enhancing resilience, it could also introduce or amplify vulnerabilities.”
Regulated entities are expected to understand and manage AI-related risks as part of their existing obligations. The special topic notes that it is important that regulatory frameworks keep pace with technology developments to support effective risk management by industry.
We will continue to closely monitor developments in AI technology, adoption trends, and the evolving regulatory landscape, to ensure that the financial system remains well-positioned to manage emerging risks.
More information
AI Special Topic (extract from Financial Stability Report, May 2025) https://govt.us20.list-manage.com/track/click?u=bd316aa7ee4f5679c56377819&id=a6bc4d90d0&e=f3c68946f8
The May Financial Stability Report (FSR) will be released on Wednesday 7 May 2025 at 9:00am.
