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Financial stability in the age of artificial intelligence: the role of algorithmic architecture

Author

Listed:
  • Anand, Kartik
  • Kazinnik, Sophia
  • Leonello, Agnese
  • Panetti, Ettore

Abstract

Artificial intelligence (AI) is rapidly transforming financial decision-making. To explore the implications for financial stability we ran simulation-based experiments on two different AI architectures. We found that Q-learning algorithms, a form of reinforcement learning, achieved a high degree of coordination, but were prone to bank run-like dynamics. In contrast, large language models , which rely on contextual reasoning, were less prone to such runs but generated heterogeneous and unpredictable behaviour. This suggests that AI architecture is itself a source of financial instability: algorithms operating in the same environment, pursuing the same goals, yield fundamentally different outcomes for financial stability JEL Classification: G01, G23, C63

Suggested Citation

  • Anand, Kartik & Kazinnik, Sophia & Leonello, Agnese & Panetti, Ettore, 2026. "Financial stability in the age of artificial intelligence: the role of algorithmic architecture," Research Bulletin, European Central Bank, vol. 143.
    • Handle: RePEc:ecb:ecbrbu:2026:0143:
    Note: 2292323
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    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques

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