BIS: Financial Sector Among ‘Most Exposed’ to AI Benefits, Risks

BIS, Bank for International Settlements

The financial sector is among the “most exposed” to both the benefits and the risks of artificial intelligence (AI), the Bank for International Settlements (BIS) said Tuesday (June 24). 

The benefits of AI for the sector include improvements for lending and payments, while the risks include more sophisticated cyberattacks, the BIS said in a Monday press release

To prepare for the impact the technology may have on the sector, central banks should embrace AI, anticipate its impact on the economy and the financial system, and use it in their own operations, according to the release. 

Central banks should also cooperate with each other, as the AI revolution has increased the importance of data, per the release. 

New generation AI models “have a direct bearing on how central banks do their jobs,” Hyun Song Shin, head of research and economic adviser at BIS, said in the release.

“Vast amounts of data could provide us with faster and richer information to detect patterns and latent risks in the economy and financial system,” Shin said. “All this could help central banks predict and steer the economy better.”

Central banks could deploy AI to use data to better predict inflation and other economic variables, to identify vulnerabilities in the financial system and to better manage risks, according to the release.

In the financial sector, the technology could improve efficiencies and lower costs for a variety of financial services, per the release.

The BIS’ own portfolio currently includes projects that use AI, Cecilia Skingsley, head of the BIS Innovation Hub, said in the release. She pointed to Project Aurora, which uses payments data to detect money laundering, and Project Raven, which uses AI to enhance cyber resilience. 

“Central banks were early adopters of machine learning and are therefore well positioned to make the most of AI’s ability to impose structure on vast troves of unstructured data,” Skingsley said. 

It was reported on June 7 that the growing dependence of banks on Big Tech companies for AI capabilities is seen as one of the biggest risks for banks. 

In May, the U.S. Treasury Department said the growing use of AI within the financial services sector poses cybersecurity risks.


Corporate Delinquencies Reach Highest Rate Since 2017

business loans, delinquencies, banking

Corporate delinquencies are reportedly at the highest rate they’ve reached in eight years.

The delinquency rate for loans from U.S. banks to both U.S. and foreign companies rose to 1.3% at the end of 2024, a figure that was the highest since the first quarter of 2017 but well below the 5% seen during the 2008 financial crisis, the Financial Times (FT) reported Monday (Feb. 17), citing data from BankRegData.

The total amount of bank debt on which U.S. business borrowers were at least one month late reached $28 billion, up $2.2 billion from three months earlier and up $5.4 billion from a year earlier, according to the report.

The report attributed the rise to interest rates that remain high, surprising some observers who expected them to fall this year. A pickup in inflation in January and concerns about the impact of President Donald Trump’s proposed tariffs have delayed further interest rate cuts by the Federal Reserve, the report said.

Corporate bank loans tend to be variable rate, so the expected decline in interest rates would have given some relief to borrowers, the report said.

The data from BankRegData does not include loans from direct lenders and private credit funds, per the report.

It was reported in January that the growth in commercial bank loans was at the slowest it’s been since the wake of the 2008 financial crisis.

Commercial bank loans grew by around 2.7% in 2024, which was only somewhat faster than the 2.3% rise seen in 2023.

A number of bankers said they hoped to see loan growth later this year, citing optimism among clients and other indicators.

Bank of America said during a January earnings call that commercial loans were up 5% year over year in the fourth quarter and that loan and deposit growth in the current year should outpace last year’s.

J.P. Morgan Chase said during a January earnings call that there has been improvement in business sentiment and that balance sheets at small businesses are healthy.

Citi CEO Jane Fraser said during a January earnings call that in the United States, “growth is not only being driven by the higher-end consumer but also by a strong and innovative corporate sector.”