European Central Bank (ECB) President Christine Lagarde has issued a stark warning, stating that the unchecked development of artificial intelligence (AI) could unleash a devastating financial crisis. To preempt such risks, the ECB has run cyberattack stress tests on 109 European banks and Lagarde urged the global community to establish an AI governance framework as rigorous as the nuclear non-proliferation treaty.
Technology Is Not the Culprit; Financial Crises Destroy Jobs
Speaking at the Cotec Europa summit in Venice, Lagarde acknowledged that even the most robust regulations cannot halt the rapid advance of AI. “We cannot stop artificial intelligence, even with good regulations,” she said. “But we can prepare so our citizens benefit and are shielded from its dangers.” What worries the ECB chief most is not AI itself but the cascading effects of its misuse or loss of control. “Looking at recent history, the force that has destroyed the most jobs and wiped out household savings is not technological change, it is financial crises,” Lagarde warned. AI is fundamentally reshaping the financial sector from within, creating new risk concentrations and opening the door to highly destructive malicious attacks.
ECB Goes on the Offensive: Stress Tests on 109 Banks
To prevent AI from becoming the trigger of the next financial tsunami, the ECB has moved from reactive to proactive. Lagarde revealed that the central bank recently conducted scenario tests on 109 banks for severe cyberattacks, and most identified security weaknesses have been remediated. She noted that advanced AI models, such as Anthropic's Mythos, can discover critical vulnerabilities in legacy banking software at unprecedented speed. This has forced the ECB to personally contact CEOs of individual banks to ensure they are prepared for AI-driven novel attacks and understand the enormous capital required to build defensive systems.
Call for 'Nuclear-Grade' Global Regulation, Reduce US Dependency
Lagarde also highlighted Europe's vulnerability in AI: heavy reliance on the US supply chain, particularly from California. She fears that AI-driven market euphoria and panic could trigger instantaneous investor sentiment collapse and severe market corrections. Facing borderless AI threats, Lagarde called for an international governance framework akin to the Cold War-era Nuclear Non-Proliferation Treaty. Domestically, she emphasized the urgency of accelerating the Capital Markets Union, combined with enhanced bank resilience and prudent oversight, to build a true firewall. “Ensuring that this technological revolution does not turn into a financial crisis is the best service the ECB can provide to the people of Europe,” Lagarde concluded.