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Rise of the machines

How could artificial intelligence impact financial stability?

This special topic from the Financial Stability Report 2025 outlines the current use of AI within the financial sector. It explores its potential benefits and challenges, and provides an overview of the evolving regulatory landscape.

Matthew Hankin

Published date:

Artificial intelligence (AI) is starting to have a significant impact across the financial system. AI offers several benefits for financial services, including improved risk management, enhanced productivity, increased innovation, and more personalised customer offerings. However, it also introduces new challenges that could affect financial stability.

How could AI impact financial stability here in New Zealand?

Could artificial intelligence impact financial stability here in Aotearoa New Zealand? That’s a question we’ve been asking here at The Reserve Bank of New Zealand in the last few months.

Kia ora, I’m Matt, A Senior Analyst in the Financial Stability Assessment & Strategy team at RBNZ – Te Pūtea Matua.

Like in so many other areas, AI is starting to have a significant impact right across the financial system.

We’ve been seeing some real benefits that AI can offer financial services. These include enhanced productivity, increased innovation, improved cyber resilience, and personalised customer offerings. It could also help financial institutions better manage threats.

But with these benefits come some emerging risks to financial stability. 

AI adoption is accelerating at a rapid pace. Models and tools are becoming increasingly sophisticated, with widespread use across financial services. But AI-driven errors, data privacy concerns, market distortions, and cyber-attacks could amplify existing systemic risks.

Market concentration also poses risks. The reliance on critical third-party providers could amplify systemic vulnerabilities, exacerbated by limited competition.

There is a lot of uncertainty over the financial stability benefits and risks we'll see in the future – so we don’t know yet which outcomes are most likely, or when they’ll happen

As the regulator of Banks and other financial institutions in New Zealand, we think regulated entities must be aware of and manage potential risks associated with AI. There are also ways in which AI can be regulated through existing standards.

For now, we are monitoring developments within AI and financial stability.

Find out more about how artificial intelligence could impact financial stability on our website.

 

Key findings of the report

  • AI adoption is accelerating: Models and tools are becoming increasingly sophisticated, with widespread use across financial services.
  • AI can potentially benefit financial stability: AI can improve model accuracy, enhance risk assessment, strengthen cyber resilience, and help financial institutions better manage threats.
  • AI may pose risks to financial stability: These include AI-driven errors, data privacy concerns, market distortions, and increased exposure to cyber attacks—all of which could amplify existing systemic risks.
  • Market concentration poses risks: Heavy reliance on a few critical third-party providers could increase systemic vulnerabilities, particularly in a context of limited market competition. 
 

Figure 2.11 Financial stability amplifiers and mitigations

Figure 2.11 Financial stability amplifiers and mitigations

The flowchart highlights various ways AI can potentially amplify existing categories of financial stability risks, including operational, liquidity, funding and credit risks. The chart also shows how AI can be employed to mitigate these risks.