In a recent interview with the Financial Times, Securities and Exchange Commission (SEC) head Gary Gensler cautioned that artificial intelligence (AI) could lead to a financial crisis within the next decade if regulators do not take action. He described the regulation of AI as a “hard challenge,” noting that multiple financial institutions may rely on the same foundational models, which could be created by tech companies that are not subject to SEC oversight.
Gensler explained, “It’s a hard financial stability issue to address because most of our regulation is about individual institutions—individual banks, individual money market funds, individual brokers. This situation involves many institutions potentially relying on the same underlying base model or data aggregator.”
He pointed out that if numerous firms depend on the same model, it raises concerns about herd behavior. Gensler warned, “I do think we will, in the future, experience a financial crisis… in the aftermath, people will look back and say, ‘Aha! There was either one data aggregator or one model that we relied on.’”
He has engaged in discussions on this matter with the Financial Stability Board and the Financial Stability Oversight Council, emphasizing that it represents a significant cross-regulatory challenge.