Lagarde Warns Europe Must Build Its Own AI to Avoid Financial Stability Risks

European Central Bank President Christine Lagarde has sounded an alarm about Europe's reliance on foreign AI models, warning that it could leave the continent vulnerable to a financial stability blind spot.

In a speech in Frankfurt, Lagarde urged European policymakers to prioritize developing their own AI capabilities and secure a role in the global supply chain. She pointed to a 2024 software failure that grounded flights and disrupted banking services worldwide as an example of the risks associated with relying on external AI models.

Lagarde cautioned that losing access to critical AI systems could have far-reaching consequences for financial stability, citing a scenario where almost every institution depends on a select few models or firms to adjust trading strategies or identify vulnerabilities in their systems. In such a scenario, a loss of access could be highly disruptive, she warned.