Australia's Central Bank Sounds Alarm on AI-Related Financial Risks

The Reserve Bank of Australia (RBA) has raised concerns over the rapid development and growing use of artificial intelligence in the financial sector. In its semi-annual Financial Stability Review, the central bank warned that advances in AI capabilities are lowering the cost and technical expertise needed for sophisticated cyberattacks against financial institutions.

The RBA noted that while AI could eventually boost productivity and improve operational resilience, the speed of its development is making the cyber threat environment more challenging. It also warned that the scale and pace of AI-related investment and financing could generate financial stability vulnerabilities if they continue expanding over the coming years.

Companies involved in AI are increasingly relying on debt to finance large-scale projects, raising exposure to investors in both private and public markets. The RBA cautioned that long-term earnings forecasts for AI technologies are based on widespread adoption and strong revenue growth, but the timing, scale, and distribution of those gains remain uncertain.

If returns fall short of expectations, several features of the AI investment boom could lead to losses among lenders and investors, according to the RBA. It also pointed out that the growing use of off-balance-sheet financing through special purpose vehicles to fund major AI infrastructure projects could result in hidden exposures and less transparent links between financial entities.