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A recent British study has revealed that artificial intelligence AI-generated fake news increases the risk of bank runs, posing a significant threat to financial stability.

Researchers emphasize that banks must enhance their monitoring systems to detect and counteract disinformation before it influences customer behavior.

The study, conducted by UK research organization Say No to Disinfo in collaboration with communications firm Fenimore Harper, highlights how generative AI can create misleading content, including fabricated news stories and memes, falsely suggesting that customer deposits are at risk. Such content can be widely disseminated through paid advertisements on social media, further amplifying the potential damage.

Concerns about the role of social media in bank runs have been growing, particularly after the 2023 collapse of Silicon Valley Bank, when depositors withdrew $42 billion in just 24 hours. The integration of AI into misinformation campaigns has exacerbated these risks.

The Financial Stability Board of the G20 issued a warning in November, stating that generative AI "could enable malicious actors to generate and spread disinformation that causes acute crises," potentially leading to flash crashes and large-scale withdrawals from banks.

Public Reaction to AI-Generated Fake News

To gauge the impact of AI-generated misinformation, Say No to Disinfo presented sample content to UK bank customers. The results were alarming:

• One-third of participants were "extremely likely" to move their money after seeing the false information.
• An additional 27% were "somewhat likely" to transfer their funds elsewhere.

"As AI is making disinformation campaigns easier, cheaper, quicker, and more effective than ever before, the emerging risk to the financial sector is rapidly growing but often overlooked," the report stated.

Researchers also noted that the widespread use of online and mobile banking allows customers to transfer funds instantly, heightening the risk of panic-driven withdrawals.

The study estimated that for every 10 pounds ($12.48) spent on social media advertisements to promote fake news, as much as 1 million pounds in customer deposits could be moved. This calculation was based on the average deposits held by UK customers, the cost of digital ads, and estimates of audience reach.

Banks and Regulators Respond

Experts emphasize the need for financial institutions to implement robust media and social media monitoring systems. These should be integrated with withdrawal tracking mechanisms to detect patterns indicating that disinformation is influencing customer behavior.

Revolut’s head of financial crime, Woody Malouf, affirmed that the London-based fintech firm is actively monitoring threats in real-time. "Whilst we believe an industry event like this is unlikely, it is still possible, so it's essential that financial institutions are prepared," he said.

Malouf also urged social media platforms to take greater responsibility in preventing the spread of harmful financial misinformation.

Other financial institutions, including NatWest and Barclays, declined to comment or did not respond to inquiries regarding the study’s findings.

The Future of AI in Banking

Despite concerns about AI-driven misinformation, banks remain broadly optimistic about AI's potential benefits. Industry group UK Finance acknowledged the challenges but reassured that "banks are working hard to manage and mitigate risks around AI, and the regulatory authorities are looking at the potential financial stability challenges the technology poses."

The release of this report coincided with an AI Summit in France, where policymakers and industry leaders focused on promoting AI adoption—a stark contrast to prior summits that prioritized discussions on managing AI-related risks.