Bank for International Settlements says AI funding is funnelled through loosely regulated private credit channels, raising stability fears
artificial intelligence investment boomand capital flows surge through loosely regulated, non-bank channels, a key international organisation has warned that an
AI downturncould develop into a sharper, faster crash than a traditional banking crisis.
hedge funds, private credit vehicles and other non-bank intermediaries. These firms commonly operated with less oversight than conventional lenders, which could create blind spots, according to Zhang Tao, BIS chief representative for Asia and Pacific regions.
BIS, a Switzerland-based institution that is often dubbed the “bank of central banks”, said in its report that the system could unwind far more rapidly in a downturn.
“If the market has any sort of correction, the interconnectedness of the financial system and interplay of vulnerabilities could mean the speed of a correction could be much faster than previous banking crisis episodes,” Zhang said in an interview with the South China Morning Post in Hong Kong.
financial marketsand raise broader stability concerns.