AI-Generated Fake News Amplifies Bank Run Risks

Artificial intelligence (AI) is exacerbating bank run risks by disseminating false information on social media, warns a recent British study. Banks must enhance monitoring to detect disinformation that could trigger adverse customer behaviors.

According to the report by Say No to Disinfo and Fenimore Harper, generative AI can fabricate news stories implying the vulnerability of customer funds or create memes mocking security concerns. These narratives can be amplified through paid social media advertisements.

The collapse of Silicon Valley Bank in 2023, where depositors withdrew $42 billion within 24 hours, underscores the rising anxiety surrounding social media-fueled bank runs. AI advancements have amplified these concerns, prompting the G20's Financial Stability Board to issue a warning in November about the potential for "acute crises" generated by malicious disinformation.

A sample of AI-generated content presented to UK bank customers revealed that approximately one-third considered moving their funds after exposure. A further 27% expressed a moderate likelihood of doing so.

The study emphasizes that AI's ability to expedite, simplify, and enhance the effectiveness of disinformation campaigns poses a significant but often disregarded threat to the financial sector. Online and mobile banking facilitate rapid fund transfers.

The report estimates that for every $12.48 spent on social media advertisements to boost fake content, up to $1 million in customer deposits could be withdrawn. Calculations consider average deposit amounts, advertising costs, and estimated audience reach.

Researchers recommend that banks monitor media and social media mentions and integrate these with withdrawal monitoring systems to identify when malicious information influences customer behavior.

Revolut's head of financial crime, Woody Malouf, highlights their real-time monitoring approach to detect emerging threats. They advocate for financial institutions' preparedness and emphasize the responsibility of social media platforms in mitigating these risks.

While regulatory bodies express concerns about AI's broader impact on financial stability, banks generally maintain an optimistic outlook on its potential. UK Finance acknowledges banks' efforts to manage AI-related risks and regulatory authorities' evaluation of the technology's stability challenges.