Financial stability challenges in the digital age

The Central Bank of Malta held its annual seminar on financial stability, bringing together regulators and industry experts to discuss the evolving landscape of financial stability in the context of rapid technological advancements.

In his opening remarks the Governor of the Central Bank of Malta, Professor Edward Scicluna reflected on the transformative journey of the financial sector, with special attention to the rise of Artificial Intelligence (AI). He said that while AI offers substantial opportunities, it also introduces new and complex risks, emphasising the importance of transparent communication, sound judgement, and collective preparedness, underscoring that public trust and policy credibility are fundamental to financial stability.

The seminar’s agenda reflected the Bank’s commitment to evidence-based analysis and macroprudential policy. Attendees were addressed by Paul Hiebert, Head of Systemic Risk and Financial Institutions Division at the European Central Bank, who delivered the keynote speech. The programme also showcased the Bank’s latest work in the field of financial stability namely, a network model for the Maltese banking system, the latest stress testing results, and an assessment of the effectiveness of Directive 16. A study on the macro-financial determinants of insurance activity was also presented and discussed.

A focal point of the seminar was the panel discussion entitled “Artificial Intelligence – Implications for Financial Stability,” The panel featured representatives from the Central Bank of Malta, European Central Bank, Malta Bankers’ Association, Malta Digital Innovation Authority, Malta Financial Services Authority, and the University of Malta. The discussion provided valuable insights into the opportunities and risks posed by AI in financial services, and the importance of responsible innovation.

In his closing remarks, Deputy Governor for Financial Stability, Oliver Bonello, reflected on the key elements discussed throughout the day. He concluded by emphasising the importance of embracing technological innovation to enhance risk management and support sustainable growth. He called for continued collaboration between financial services practitioners, regulators, and technology experts.