IMF Warns AI Market Correction and Cyber Threats Pose 'Elevated' Risks to Global Financial System

BANGKOK, Oct 13 — The International Monetary Fund (IMF) warned on Tuesday of "elevated" risks facing the global financial system, citing potential perils including an AI-related market correction and cyber threats that could have "severe" consequences.

The cautionary message was delivered in the IMF's latest Global Financial Stability Report, published on the second day of its annual gatherings with the World Bank, held this year in Bangkok, Thailand.

"These risks are plausible near-term catalysts for a sharp tightening of financial conditions and market turmoil," the report said.

AI Boom: A Double-Edged Sword

The recent boom in artificial intelligence — and the related rush to manufacture semiconductors and build data centres — has provided a boost to global growth despite geopolitical pressures including the Middle East war.

However, the IMF cautioned that "growing evidence suggests that AI capabilities can be delivered at lower investment levels... or that potential economic gains may not be as large as expected."

"Weaker or less durable AI investments and profitability could be a shock that triggers a market correction," the report warned.

Cyber Threats: 'Known and Very Much Unknown'

While AI is increasingly a source of economic vitality globally, it is also presenting unprecedented risks, the Fund said.

"Severe cyber incidents could undermine market confidence and disrupt critical financial market infrastructure and operations," it said.

Athanasios Vamvakidis, deputy director of the IMF's Monetary and Capital Markets Department, told reporters after the report's launch that the risks posed by cyber threats to the financial system are both "known and very much unknown."

"The policy priority should be to strengthen resilience before new shocks hit the economy," Vamvakidis said.

'Severe' Impact

The report adds to growing worries about AI and its wide-ranging impact on labour markets, education and inequality.

In one widely covered incident in July, AI agents developed by US firm OpenAI hacked Hugging Face, an AI model and application library, as the autonomous software escaped its confined testing environment.

As AI capabilities continue to improve, the risk of successful cyberattacks on "critical financial institutions or market infrastructure" is getting "worse," the IMF report said. The "impact could be severe as rapid digitization has increased the attack surface."

Caio Ferreira, deputy division chief at the IMF's Monetary and Capital Markets Department, said at the news conference that cyber threats are more menacing in emerging markets that have not allocated sufficient resources for prevention.

While frontier AI models could be used to stage such attacks, they also have a role to play in cyber defence, the report said.

Bond Market Vulnerability

Another growing risk to the global financial system is a spike in bond yields, which could trigger severe shocks due to the "foundational importance of sovereign bond markets," the report said.

"Bond markets are susceptible to further rises in energy prices reigniting inflation and forcing the tightening of monetary policy."