BANGKOK: The International Monetary Fund (IMF) on Tuesday warned of elevated risks to the global financial system, cautioning that a correction in artificial intelligence (AI)-related markets and severe cyber incidents could trigger financial turmoil and disrupt critical market operations.
The warning was issued in the IMF’s latest Global Financial Stability Report, published on the second day of the Fund’s annual meetings with the World Bank in Bangkok, Thailand.
“These risks are plausible near-term catalysts for a sharp tightening of financial conditions and market turmoil,” the report said.
The recent boom in AI, alongside heavy investment in semiconductor manufacturing and data centres, has supported global economic growth despite geopolitical pressures, including the war in the Middle East.
However, the IMF cautioned that growing evidence suggested AI capabilities could be delivered with lower levels of investment, while the potential economic benefits might fall short of expectations.
“Weaker or less durable AI investments and profitability could be a shock that triggers a market correction,” the report said.
The Fund also highlighted the growing threat posed by cyberattacks as AI capabilities continue to advance, warning that severe incidents could undermine market confidence and disrupt critical financial market infrastructure and operations.
The risks associated with cyber threats to the financial system were both “known and very much unknown”, Athanasios Vamvakidis, deputy director of the IMF’s Monetary and Capital Markets Department, told reporters following the report’s launch.
“The policy priority should be to strengthen resilience before new shocks hit the economy,” he said.
Cyber threats pose growing risks
The report adds to mounting concerns about AI’s wider implications for employment, education and inequality, as well as its potential to expose financial institutions to increasingly sophisticated cyberattacks.
It cited the growing capabilities of AI systems as a factor increasing the risk of successful attacks on critical financial institutions and market infrastructure.
“The impact could be severe as rapid digitisation has increased the attack surface,” the report said.
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Caio Ferreira, deputy division chief in the IMF’s Monetary and Capital Markets Department, said emerging markets faced greater cyber risks when they lacked sufficient resources for preventive measures.
The report noted that advanced AI models could be used to carry out cyberattacks but could also contribute to strengthening cyber defences.
Rising bond yields another concern
The IMF also identified a sharp rise in bond yields as another potential source of instability, given the fundamental importance of sovereign bond markets to the global financial system.
According to the report, a further increase in energy prices could reignite inflation, forcing central banks to tighten monetary policy and putting additional upward pressure on bond yields.
Such developments could generate severe shocks across financial markets, adding to the risks posed by uncertainty surrounding AI investments and escalating cyber threats.
The Fund stressed the importance of strengthening financial system resilience before new shocks materialise.
