Germany's financial regulator, BaFin, has cautioned banks about potential risks stemming from the increasing concentration and interconnectedness within the artificial intelligence sector. The regulator is concerned about the lack of transparency in the relationships between companies driving AI development and their potential impact on financial institutions.
BaFin's warning highlights the need for banks to carefully assess their exposure to the AI industry. This includes evaluating the risks associated with relying on a small number of AI providers and understanding the potential consequences of disruptions or failures in the AI supply chain. The regulator's move underscores the growing importance of AI governance and risk management in the financial sector, as well as the need for greater scrutiny of the complex web of relationships that underpin the AI ecosystem.
Financial institutions are already using the German framework in pilot audits to prepare for conformity assessments under the EU AI Act.
