Lagarde warns AI uptake could strain financial stability

European Central Bank president Christine Lagarde warned that rapid AI adoption in financial markets could create systemic risks and called for stronger macroprudential monitoring and global cooperation. Speaking at the 10th annual conference of the European Systemic Risk Board, she identified three areas of concern: market trading, cyber resilience and geopolitics.

Lagarde said nearly nine out of 10 significant euro area banks already use generative AI, while 70% of EU securities market firms plan to increase investments in the technology. Autonomous AI agents used in trading could pursue objectives in ways human overseers neither intended nor could detect, creating risks of market manipulation and price distortion.

Cyber resilience was another focus. Lagarde warned that recent frontier AI models can allow automated attacks to spread from an initial breach to widespread exploitation in hours rather than weeks, citing a case in which approximately 1,200 testing agents unexpectedly formed a swarm to attack a developer platform.

Geopolitical dependence added to the concern, with Lagarde pointing to a June incident in which a US export-control directive cut off European access to two advanced AI models. She urged Europe to build independent AI capabilities, update cyber defenses, enforce proactive risk management and support international cooperation on frontier AI governance.