AI cyberattack could bring global financial system to a screeching halt, warns IMF

The global financial system must be on the alert for an AI driven cyberattack that could bring it to a screeching halt, the International Monetary Fund has warned.

In a hard-hitting report, the Fund said a serious incident could disrupt critical services including payments systems as well as access to personal bank accounts.

It said finance is a growing source of ‘systemic risk’ from cyberattack – echoing concerns already publicly expressed by Bank of England governor Andrew Bailey.

Most worryingly, the IMF cautions that AI cyberattacks ‘can be hard to contain’ and in 70 per cent of recorded cases the software providers concerned had no time to patch up vulnerabilities before hackers exploited them.

The warnings in the Fund’s global financial stability report come a day after IMF chief Kristalina Georgieva described AI as ‘a slow-moving tsunami’ that will wipe out jobs around the world.

IMF managing director Kristalina Georgieva

The annual meetings of the IMF and World Bank are taking part in Bangkok in Thailand

At the start of the Fund’s annual meetings in Bangkok in Thailand, she said around 40 per cent of all jobs will eventually be ‘augmented, downgraded or eliminated’ by artificial intelligence.

‘It is a slow-moving tsunami but a tsunami nonetheless,’ she said.

‘It is a transformative technology, it so completely changes how we work, how we live.

‘Love it, hate it, or fear it, it is here, and we are already seeing the first wave of impact.’

But as well as changing the world of work, AI-driven cyberattacks and other hacking incidents pose a major threat to business and the wider financial system.

In Britain, several major retailers including Marks & Spencer and the Co-op and car maker Jaguar Land Rover have suffered severe cyber disruption at a considerable cost to shareholders and anxiety for customers.

Most recently the online fashion retailer ASOS has been caught in the crosshairs of attackers and belatedly let it be known that valuable customer data may have been taken.

A blog by IMF officials argues that ‘frontier AI models could accelerate attacks and defences’.

The same report also focuses on the threat an AI correction on the stock market, after rapid rises in the shares of industry pioneers, could trigger a broader slump.

Borrowers – including the UK government and British households with mortgages – have already suffered ructions on the bond market.

The yield on ten-year UK gilts – a key measure of government borrowing costs – has soared to 19-year highs above 5.5 per cent while the 30-year yields have topped 6 per cent for the first time since 1998.

The yield on American treasuries is also on the rise and French bonds are in deep trouble amid speculation that there may have to be a European Central Bank bail-out.

The Fund’s experts attribute the rise in yields to renewed inflation fears arising from higher energy prices and over extended government balance sheets. It is noted that yields are at near levels not seen before the financial crisis.

They warn of an ‘adverse feedback loop’ the combination of fiscal imbalances and the increasing use of debt for speculation in the bond markets. It was such conditions which contributed to Britain’s ‘Truss tantrum’ at the time of the mini budget in October 2022.

Despite the dire warnings the Fund says financial markets have been ‘resilient amid solid economic growth’ so far. But it added there is no room for ‘complacency.’

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