Systemic risk intensifies with AI, geopolitics
Bank of Finland Deputy Governor Marja Nykänen highlighted the intensification of systemic risks due to artificial intelligence, geopolitical events, and evolving financial networks. She delivered a keynote address at a joint conference in Helsinki on June 4, 2026.
New threats reshape financial stability
Marja Nykänen noted that the financial environment has become markedly more demanding, with risks more numerous, interconnected, and harder to assess.
Geopolitical and macroeconomic uncertainties, such as ongoing conflicts in Ukraine and the Middle East, intensify these challenges, leading to market volatility and potential inflation.
Cyberattacks, hybrid threats, and the misuse of artificial intelligence have also become daily realities, driven by both geopolitical events and rapid technological progress.
The emergence of new non-bank market participants adds complexity, creating systemic risks not common in the "old world.
" Even ESG and climate change risks, though less in media focus, demand continued attention.
These developments necessitate richer, more integrated, and multidimensional data, combining traditional financial information with health, energy, and cross-border interconnections.
Analytical approaches must also evolve, relying more on scenario analysis for developments with little historical precedent.
Managing the unknown, not just the measurable
Marja Nykänen highlighted that traditional risk management is no longer sufficient; financial institutions must also manage uncertainty.
She explained that when probabilities are unclear, economic agents exhibit ambiguity aversion, leading to increased caution, reduced market activity, and lower liquidity.
This distinction is crucial for financial stability, as seen in the subdued Finnish housing market where uncertainty about interest rates and economic outlook weighs on transactions.
Research is essential to understand how uncertainty affects market behavior, liquidity, and shock transmission, especially when future disturbances may be unprecedented.
Trust, buffers, and the regulatory pendulum
The emphasis on resilience highlights the critical role of trust and robust buffers in an unpredictable environment, where sentiment shifts spread rapidly.
While regulatory simplification is continuously needed, it risks undermining hard-won stability if it leads to a "race to the bottom.
" Sustained vigilance, adaptive frameworks, and strong operational preparedness are essential to navigate future shocks without compromising financial stability.