FRANKFURT, June 3 - The European Central Bank held discussions last week with commercial lenders to address the risks posed by the latest artificial intelligence models and plans to press banks to implement concrete protective steps, board member Frank Elderson said.
Elderson warned that the rapid development of AI technology increases the likelihood that cyberattackers will be able to quickly identify and exploit weaknesses in banks' defenses, and that seemingly minor problems may be combined by malicious actors into much larger threats.
"As a next step we will send a so-called 'dear CEO letter' to all banks in which we aim to ask banks to take proactive measures to ensure the continued robustness and security of their systems in the face of these transformative challenges and will follow up with individual banks in a targeted manner," Elderson said on Wednesday.
In his role as Vice Chair of the ECB's Supervisory Board, Elderson emphasized that the challenge extends beyond a pure cybersecurity incident response - it demands a strategic, management-led effort. He said firms must commit expertise and resources over multiple years to address the evolving threat.
Elderson acknowledged that these investments may be costly but argued that the banking sector's strong profitability should provide institutions with the financial capacity to make the necessary expenditures.
He also raised concerns about unequal defensive capabilities across the industry, noting that larger banks are generally better positioned to afford advanced protections while smaller and medium-sized lenders may struggle to do so.
Another focal point for Elderson was the broader critical infrastructure on which banks depend. He identified cloud providers, telecommunications networks, payment systems and electricity and water supplies as potential targets that, if hit, could amplify operational risk.
"As a result, scenarios that were once considered tail risks may become more likely," he said, underscoring the potential for previously remote scenarios to move closer to the realm of plausible outcomes.
The ECB's planned 'dear CEO letter' will request proactive steps from all banks and signal that supervisors will pursue targeted engagement with individual firms to ensure firms are addressing the risks raised by rapidly advancing AI capabilities.