An AI-fuelled investment boom increasingly financed by private credit would create a new threat to the euro area’s financial system, especially its insurers and pension funds, the European Central Bank has warned.
The ECB said in a report on Tuesday that if private credit continued to grow rapidly as a source of funding for AI companies and data centres, investors in the region could be left exposed to losses resulting from disappointment in the technology’s potential.
“If exposures grew rapidly and expected AI-related cash flows disappointed, private credit could become a more material source of credit risk and a potential amplifier of stress for euro area financial institutions,” the central bank said in an extract from its financial stability review.