Stability

• Agustín Carstens, head of the Bank for International Settlements, warned at a conference hosted by India’s central bank that the AI boom is creating new risks for financial stability. • He noted that AI growth is increasingly funded through private credit and debt rather than corporate earnings, creating opaque and interconnected financial links. • This shift in funding means regulators must closely monitor debt levels to prevent systemic failures in the financial markets.

• Stability AI has raised $76 million in a Series B funding round backed by major industry players including Sony, Universal Music Group (UMG), and Electronic Arts (EA). • This investment brings the company's total funding to $232 million since Prem Akkaraju took over as CEO in June 2024. • The capital will be used to develop next-generation, purpose-built AI tools specifically designed for professional creatives in the gaming, music, and entertainment sectors.

• Financial Stability Board (FSB) chief Bailey has warned that the emergence of new AI models poses a growing risk to global financial stability. • Bailey emphasized the urgent need for robust response and recovery capabilities, specifically the ability to restore critical systems and data from "bare metal" after major cyber incidents. • This warning highlights the systemic vulnerability of financial infrastructure to AI-driven cyber threats and the potential for widespread operational failure.

• Financial watchdogs warn that the rapid integration of AI models could threaten global financial stability, necessitating increased international cooperation and vigilance. • AI hyperscalers, including Alphabet, Meta Platforms, Oracle, and SpaceX, are issuing billions in corporate debt to fund massive infrastructure investments. • This surge in corporate borrowing is competing with the U.S. Treasury Department for capital, contributing to the 30-year Treasury yield reaching its highest level since 2007.

• Financial Stability Board (FSB) chief Bailey has warned that the emergence of new AI models poses a growing risk to global financial stability. • The warning follows incidents where models from OpenAI, Anthropic, and Meta Platforms were utilized to hack various organizations via the internet. • Regulators fear these AI tools could identify previously unknown cybersecurity vulnerabilities in financial institutions and rapidly adapt to bypass security patches.

• Capital market leaders and financial executives gathered at the 20th anniversary of the Thailand Focus conference to discuss strategies for reigniting foreign investor confidence. • Experts including Asadej Kongsiri of the Stock Exchange of Thailand and representatives from UBS, CLSA, and DBS highlighted that attractive valuations and emerging growth engines place the country in a "sweet spot" for investment. • The panel emphasized that achieving sustained growth depends heavily on political stability and the effective execution of government policies.

• Foreign Portfolio Investors (FPIs) infused Rs 23,544 crore into Indian equities during August, marking a significant shift in investment trends. • This surge follows four consecutive months of heavy selling and is driven by improving quarterly earnings, a stable rupee, and positive market prospects. • The trend is critical as it signals a return of foreign confidence in the Indian market after a period of sustained capital outflow.

• Foreign Portfolio Investors (FPIs) invested ₹23,544 crore into Indian equities during August, following a similar inflow of ₹20,200 crore in July. • This surge marks a significant turnaround after four consecutive months of heavy selling, driven primarily by strong corporate earnings and the stability of the Indian rupee. • The trend signals renewed global confidence in the Indian market, reversing previous bearish sentiment.

Exclusive: As wildfires rage, Frank Elderson says more work needed to assess risk from collapse of ecosystem servicesA senior policymaker at the European Central Bank has said the climate emergency and the breakdown of nature poses a dramatically growing risk to the global economy.Frank Elderson, a member of the ECB’s executive board, said the eurozone lender of last resort was stepping up its monitoring of the financial risks linked to the destruction of “ecosystem services”, which are nature-related processes or assets that support human activity. Continue reading...

• The Monetary Authority of Singapore (MAS) has identified a potential boom in AI investments as a key risk to global financial stability. • To address this, MAS and the Association of Banks in Singapore (ABS) have set up a task force to enhance cyber and technology resilience against AI-driven threats. • The move aims to mitigate potential risks and ensure the stability of the financial system in the face of rapid technological advancements.

• Iraq continues to struggle with severe political instability and recovery challenges six years after the war against the Islamic State. • Humanitarian needs remain critical, with three million people requiring assistance and over one million individuals still internally displaced. • These ongoing crises hinder the nation's reconstruction efforts and overall stability.

• Foreign ministers from the Quad nations—India, Australia, Japan, and the US—convened in Manila to address maritime security and regional stability. • The meeting took place against a backdrop of escalating confrontations between the Philippines and China in disputed waters. • The discussions emphasize the group's commitment to a free and open Indo-Pacific, highlighting the strategic importance of maintaining international law and peace.

• Gulf states have prioritized diplomacy and regional stability over military conflict as the US-Iran tension enters its fifth month. • While Washington struggled to find a clear path forward, Gulf nations focused on de-escalation and securing the critical shipping lanes of the Strait of Hormuz. • This shift highlights a divergence in strategy, where regional priorities for stability have proven more durable than the initial assumptions made by US policymakers.

Central bank’s financial policy committee members voice concern on trimming big lenders’ financial buffersBusiness live – latest updatesThe Bank of England is planning to loosen capital requirements for major UK lenders, even as policymakers expressed concern about the threat to financial stability from rapid AI developments and debt-fuelled stock investments.The central bank said on Tuesday it was looking to remove and loosen some rules introduced after the 2008 financial crisis that determine the size of the financial cushion required to absorb losses and protect consumers and taxpayers when things go wrong. Continue reading...

• Kevin Warsh officially assumed the role of Federal Reserve chair on May 22, 2026, succeeding Jerome Powell who concluded an eight-year tenure on May 15. • Warsh is prioritizing price stability over immediate interest rate cuts, a stance that has alarmed Wall Street and contradicts the preferences of President Donald Trump. • This transition occurs amidst a period of market strength, with the Dow Jones, S&P 500, and Nasdaq all reaching record highs.

• Investors are increasingly prioritizing political stability and capital protection over high-growth returns due to global geopolitical tensions and persistent inflation. • Singapore has emerged as the only non-European nation to rank in the top 10 safest countries for investors heading into 2026. • This shift highlights Singapore's enduring reputation as one of Asia's most stable and secure financial hubs during periods of economic uncertainty.

• The European Stability Mechanism (ESM), established in 2012 during the eurozone debt crisis, continues to operate as a financial safety net despite not disbursing a bailout since 2018. • The institution previously provided low-interest loans to Greece, Portugal, Spain, Ireland, and Cyprus, requiring these nations to implement strict political and fiscal reforms. • Managing Director Pierre Gramegna asserts that the ESM remains relevant as it is mandated to safeguard eurozone stability and assist banks facing financial distress.

• President Kassym-Jomart Tokayev convened the 38th plenary session of the Foreign Investment Committee to discuss Kazakhstan's strategic economic growth. • The session focused on leveraging political stability to attract global capital and maintain the country's position as an investment leader in Central Asia. • This initiative matters as Kazakhstan seeks to diversify its economy and strengthen international partnerships to ensure long-term financial resilience.

• Prime Minister Narendra Modi held a telephone conversation with Iranian President Masoud Pezeshkian on Tuesday to discuss the ongoing crisis in West Asia. • President Pezeshkian briefed the Indian leader on recent regional developments, while PM Modi emphasized the necessity of dialogue and diplomacy to restore stability. • A key point of discussion was the freedom of navigation in the Strait of Hormuz, a critical maritime route for global energy shipments.

• The Bank for International Settlements (BIS) has warned that while AI supports global growth, the massive trillion-dollar spending on infrastructure and opaque financing could pose a systemic risk to financial stability. • Key concerns highlighted by the BIS include rising debt levels and the potential for financial instability stemming from the rapid, high-cost expansion of AI technologies. • In response to operational risks, the Reserve Bank of India (RBI) has mandated that banks and regulated entities conduct board-approved gap assessments on AI-related cybersecurity threats.

• The UN human rights chief formally praised a new peace treaty signed between the United States and Iran on June 13, 2026. • The accord aims to resolve decades of conflict between the two nations and serves as a critical step toward establishing broader regional stability. • This diplomatic breakthrough is significant as it signals a mutual intention to settle long-standing differences and move forward in peace.

• The U.S. Air Force conducted a hypothetical air campaign against Iran in 2026, utilizing advanced technological capabilities to eliminate Iranian leadership. • While the strikes achieved immediate tactical victories, they resulted in severe regional fallout, including widespread humanitarian crises and strategic instability. • The scenario highlights the limitations of military force, demonstrating that purely kinetic solutions often lead to international isolation and geopolitical chaos.

• Geopolitical risk is emerging as a critical factor influencing global financial stability, as detailed in the June 2026 Bulletin. • These risks extend to organizational capacity, specifically threatening the stability of offshore teams and third-party service providers. • Conflict, communication outages, and general disruptions can impair the ability of financial institutions to maintain essential operations.

• Global stability is facing a systemic threat as economic warfare, resource shortages, and geopolitical tensions create a dangerous chain reaction of overlapping failures. • These intersecting crises are driving increased migration pressures and widespread social unrest, which further destabilize societies and intensify international conflict. • Analysts warn that the cumulative psychological impact of these simultaneous systemic collapses may become as hazardous as the physical crises themselves.

• The European Central Bank's (ECB) May 2026 Financial Stability Review warns that conflict in the Middle East has caused a significant energy supply shock. • This geopolitical instability is driving up inflation risks and threatening overall economic growth across the region. • The report highlights increased vulnerabilities within non-bank financial institutions and sovereign debt markets due to prolonged fiscal challenges.

• The European Central Bank (ECB) reports that global financial stability vulnerabilities remain elevated as a major geoeconomic shock unfolds. • This instability is primarily triggered by the ongoing war in the Middle East, which is testing the resilience of the global financial system and real economy. • The situation is further aggravated by persistent uncertainty regarding international cooperation and the state of global trade.

• The International Monetary Fund (IMF) issued a May 7, 2026 alert on growing dangers to global financial stability from artificial intelligence, warning that AI is simultaneously empowering both defensive and offensive cyber capabilities. • Advanced AI models now dramatically reduce the time and cost required to uncover and exploit system vulnerabilities, enabling faster and more widespread attacks that could cascade across interconnected financial markets and infrastructure. • Anthropic's Claude Mythos Preview model demonstrated breakthrough autonomous cyber abilities, identifying and exploiting vulnerabilities in major operating systems and browsers even when operated by non-specialists, signaling how rapidly AI is tilting advantage toward attackers.

• The Federal Reserve Board issued its Financial Stability Report for May 2026 on May 8, assessing risks amid solid economic growth and market highs. • Report highlights stress from rising oil prices, geopolitical strains, and narrow equity leadership concentrated in AI-driven tech sectors. • Fed signaled no imminent rate cuts after holding steady in late April, citing insufficient inflation progress with core PCE easing but headline above 3.5%.