AI in action · Regulation
Fed Survey: AI Is Now the Top Risk to the Financial System
AI was the risk most often cited by market contacts in the Fed's November 2026 Financial Stability Report: 87% named it, up from 50% in the spring.
Six months ago, artificial intelligence was one worry among many for the people the Federal Reserve asks about threats to the financial system. It is now the main one. In the Financial Stability Report published on November 13, 2026, 87% of the market contacts surveyed by the New York Fed in September and October cited AI as a salient risk, up from 50% in the spring edition. A correction in risk assets came second at 52%, followed by higher long-term interest rates at 48%, and cyberattacks and fiscal debt sustainability at 43% each.
The sample is small, 23 contacts at broker-dealers, banks, investment funds and advisory firms, and the Fed stresses that the box reflects their views, not those of the Board. But the jump is the largest of any risk in the survey, and respondents did not mean one thing by it. They described three separate concerns: equity valuations that could fall if AI earnings disappoint, cyber risk, and the complex ways the AI build-out is being financed.
The cyber point is the newest. Respondents said advances in AI are lowering the barrier to sophisticated attacks by state and non-state actors, and some pointed to "damage caused by frontier AI models themselves", meaning harm from the models rather than from the people using them. Several warned that an outage in trading, settlement or payment systems could damage confidence in financial institutions, and the report notes that cyberattacks and fiscal sustainability were seen as the risks with the most severe potential consequences.
The valuation worry fits the Fed's own reading of markets. The report says the forward price-to-earnings ratio of the S&P 500 remains well above its historical median even after earnings forecasts rose, and that the extra return investors demand for owning stocks over Treasuries sits near the low end of its range. It also finds hedge fund leverage at its highest since comprehensive data began in 2013, concentrated in the largest funds.
None of this is a forecast of a crash. The Fed still describes the banking system as sound and resilient. What the survey does show is how quickly professional opinion has converged: when nearly nine in ten risk managers name the same theme, a disappointment in that theme is no longer a surprise anyone can claim not to have seen coming.
Sources: Federal Reserve — Financial Stability Report, November 2026 (PDF); CNBC — AI risks are the biggest threat to the financial system, Fed survey finds (Nov 13, 2026)