The Financial Stability Board said its Plenary sees vulnerabilities in the global financial system as still elevated and more complex after two developments added to the risk landscape: the conflict in the Middle East and the emergence of powerful frontier artificial intelligence models. The meeting also advanced work on responsible AI adoption by financial institutions, regulatory and supervisory modernisation, implementation monitoring, and data gaps in nonbank financial intermediation. The Plenary pointed to high asset valuations and compressed risk premiums, elevated sovereign debt alongside high public deficits and shorter debt maturities, and greater use of leveraged trading strategies in government bond markets. It also highlighted rapid growth in private credit that remains largely untested in a prolonged downturn, operational outages at critical financial system nodes, and the effect of global conditions on emerging market economies. The Middle East conflict has increased concern over energy and commodity markets, especially for commodity-importing countries, with inflation and bond yields rising, while frontier AI was flagged as a potential amplifier of cyber risk, including where patching is rushed or poorly executed. A stocktake found modernisation initiatives are widespread across jurisdictions and cover both regulation and supervision. The Plenary also reviewed work on improving implementation outcomes and on data needed to monitor leveraged strategies in sovereign bond markets, including risk identification frameworks, public disclosure, and cooperation between authorities, including in offshore financial centres. The FSB will publish for consultation in the coming weeks its report on sound practices for financial institutions' responsible AI adoption, which was developed at the request of the US G20 Presidency. The final report is due to the G20 Finance Ministers and Central Bank Governors in October, and the FSB's Implementation Monitoring Review is expected to issue recommendations on improving recommendation-setting processes later this year.
Financial Stability Board2026-06-01
Financial Stability Board highlights added financial stability risks and plans AI adoption consultation
The Financial Stability Board Plenary reported that global financial vulnerabilities remain elevated and more complex, citing high asset valuations, elevated sovereign debt, rapid private credit growth, leveraged trading in government bond markets, and new risks from the Middle East conflict and frontier artificial intelligence. It advanced work on responsible AI adoption by financial institutions, regulatory and supervisory modernisation, and data gaps in nonbank financial intermediation. The FSB will shortly consult on sound practices for responsible AI adoption, with a final report to the G20 expected later this year.