Makhlouf warns AI financing risks echo past investment booms
Central Bank of Ireland Governor Makhlouf warned that stretched AI valuations, debt financing and circular funding raise financial stability risks. He also announced an AI consumer sandbox and five priorities for tokenised finance.
AI adoption raises accountability stakes
At the fifth Financial System Conference, Makhlouf said most regulated firms already use AI.
He identified systemic and cyber risks, operational resilience, consumer protection and financial crime as supervisory concerns.
AI investment supports Irish growth through data centres and semiconductor manufacturing, while skills bottlenecks complicate labor market adjustment.
Humans remain accountable for deployed AI.
Around half of Innovation Hub engagements now concern AI, up from one in five.
The third Innovation Sandbox programme, Advancing AI for Consumer Good, opens applications in January.
It will cover vulnerable consumers, fair and explainable automated decisions, fraud resilience and accountability as AI agents move from advice to execution.
Five priorities for tokenised finance
A feedback statement on distributed ledger technology and tokenisation sets five priorities: central bank money settlement and collateral eligibility; legal and regulatory clarity; innovation engagement; on-chain analysis; and common standards to limit fragmentation.
Work includes Eurosystem projects Pontes and Appia, cooperation with the Department of Finance under Ireland for Finance Strategy – Vision 2030, a dedicated tokenisation access point in the Innovation Hub and policy sprints drawing on industry expertise.
Technology neutrality is not blindness
Makhlouf said technological change does not alter the bank's stability and consumer protection objectives.
Tokenisation's consumer benefits, commercial viability and resilience under stress remain uncertain.
He called for scenario planning that captures risks beyond historical precedent.
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