The European Central Bank (ECB) has published a working paper finding that banks reassessed borrowers in industries highly exposed to artificial intelligence (AI) as safer as public attention to AI increased after ChatGPT’s release in the fourth quarter of 2022. However, established market leaders benefited less than smaller competitors, narrowing their relative credit risk advantage. The analysis covers unlisted, nonfinancial firms in Germany, France, Italy and Spain from the first quarter of 2021 through the fourth quarter of 2024, using roughly 6.8 million observations of lending relationships across quarters. A rise of one standard deviation in public AI attention was associated with approximately 5% lower assessed probability of default (PD) for borrowers in the highest exposure quartile relative to other borrowers. The favorable reassessment persisted within existing lending relationships and was weaker for firms relying heavily on labor. Banks with existing industry expertise made substantially more favorable reassessments than other lenders to the same borrower, while longstanding lending relationships produced no comparable difference. Within highly exposed markets, leaders’ assessed PD increased by roughly 8% relative to the smallest competitors per standard deviation of attention, compared with other markets. This represented a narrowing of leaders’ relative safety advantage, not an absolute increase in their assessed risk. Credit allocation followed the same pattern. Market leaders experienced approximately 3.8% less drawn credit and 2.4% less committed credit relative to the smallest competitors, alongside more lending relationship exits and fewer new lenders. Their relative advantage in subsequent repayment performance also narrowed, even after accounting for lenders’ average PD estimates. These associations do not establish that AI made exposed firms safer or distinguish changes in credit supply from borrower demand. The paper identifies a supervisory concern where favorable reassessments concentrate among banks already heavily exposed to affected industries, potentially concentrating losses if those assessments prove too optimistic.
European Central Bank publishes research showing banks lower assessed risk for borrowers exposed to AI while narrowing market leaders’ advantage
The European Central Bank has published research associating a rise of one standard deviation in public attention to artificial intelligence (AI) with approximately 5% lower assessed default risk for borrowers in highly exposed industries relative to other borrowers. Within highly exposed markets, established leaders benefited less than smaller competitors and experienced relatively less credit and fewer lending relationships. The findings measure banks’ assessments rather than establish that AI made borrowers safer, with potential supervisory concerns where optimism concentrates among lenders already heavily exposed to affected sectors.