Moody’s Warns: Banks May Be at the Mercy of Technology Companies
Moody’s stated that the increasing dependence of the financial sector on artificial intelligence (AI) and cloud computing services leaves large banks at the mercy of a small group of technology firms. This situation could expose banks to widespread disruptions and price increases. While the integration of artificial intelligence into daily operations has the potential to reduce costs and increase revenues, significant investments will be required for this to happen.
Moody’s expressed that the dependence of most financial firms on core AI models and cloud computing providers could create a systemic risk. The report pointed out that an issue faced by a major provider could quickly spread to other customers and sectors. As the adoption of AI deepens, regulatory authorities are expected to focus more on operational resilience and third-party dependencies.
Additionally, Moody’s emphasized that the "risk of vendor dependency" could arise. This means that dominant AI model and infrastructure providers may have the potential to control the prices of AI services over time. This situation could also pose a problem for managers of generative AI companies that are experiencing losses under pressure to generate profits for investors.
Large banks and insurance companies have years of experience negotiating technology contracts. For example, Charlie Nunn, CEO of Lloyds Banking Group, announced a £13 billion AI investment plan aimed at attracting new business and increasing efficiency. However, this process may require reskilling and hiring new personnel.
Moody’s predicts that by 2030, there is a 20% chance that AI could perform the job of a “mid-level employee.” Furthermore, it is noted that AI could facilitate the transition of customer accounts to options offering higher interest rates, which could lead to large sums of money being moved quickly. In this context, the trust of depositors in the institution and the resilience of deposit financing are critically important.
