More global banks would be pushed to the brink in a doomsday scenario compared to a year ago, according to the International Monetary Fund, which said AI-related challenges could imperil banks even as profits soar.
The IMF's latest stress test examined how banks would cope with an AI crash, soaring government bond yields and an economic slowdown. Under this scenario, 22% of global banking assets would be held in 110 "weak" lenders, whose core capital ratio would fall below 7%, or a higher threshold for the world's most complex banks.
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In last year's test, 18% of banking assets sat in 88 "weak" lenders under stressed conditions. The IMF's Athanasios Vamvakidis said the scenarios for each year reflected risks that were considered pertinent at the time, based on a common methodology. Risks have amplified this year across the global economy amid energy supply disruption, fears of an AI bubble and rising yields.
"It's a reminder that we shouldn't take resilience as a given," Vamvakidis said, adding that the analysis should act as counsel for authorities who are "thinking about regulatory changes." Policymakers have led a wave of deregulation, propelling banks to record profits and bumper shareholder payouts.