Frankfurt: Germany’s financial watchdog BaFin has announced a new push to inspect banks and financial institutions more closely as concerns grow over the risks linked to artificial intelligence and cyber security. The regulator said advanced AI systems are creating serious new threats that could expose weaknesses in banking networks and older technology systems.
BaFin President Mark Branson said the financial sector is entering a period where AI can be both useful and dangerous at the same time. While banks are increasingly using artificial intelligence to improve customer service, fraud detection, and data analysis, regulators fear the same technology can also be used by cyber criminals to attack financial institutions more effectively.
The warning came as BaFin revealed plans to launch targeted inspections focusing specifically on technology risks inside banks and financial firms. Instead of carrying out only broad reviews, the regulator will now examine particular systems and digital operations that could be vulnerable to attack.
Branson said the risks connected to AI are now substantial and cannot be ignored. According to the regulator, many banks still depend on old software systems that may not be prepared to face increasingly sophisticated cyber threats powered by artificial intelligence.
The concern is growing across Europe after reports emerged about highly advanced AI models that are capable of detecting hidden software flaws. One of the models that recently attracted attention is called Mythos, developed by AI company Anthropic. Reports suggest the system was able to identify security weaknesses in computer operating systems and web browsers, including some vulnerabilities that had remained unnoticed for years.
Cyber security experts say this development shows how AI can dramatically increase the speed and scale of cyber attacks. Instead of hackers spending weeks searching for weaknesses, advanced AI systems may now perform similar work within minutes. Regulators worry that this could lead to more frequent attacks on financial institutions, payment systems, and customer databases.
BaFin said it is creating a dedicated team for what it described as “IT spotlight inspections.” These inspections will focus on areas where the risk is believed to be highest. Officials hope the approach will allow faster action before problems become major crises.
The German regulator also warned that the financial sector has become one of the most attractive targets for cyber criminals because banks hold sensitive customer information and control large financial transactions every day. A major cyber attack could cause widespread disruption not only for banks but also for payment systems, markets, and businesses connected to them.
The move by BaFin reflects a wider global debate about the rapid rise of artificial intelligence. Regulators and governments around the world are trying to balance innovation with safety as AI systems become more powerful. International financial organizations have also raised concerns about the possibility of AI driven cyber attacks affecting global financial stability.
In Britain, regulators recently warned that the latest generation of AI models could cause significant disruption in areas such as operational resilience and cyber security. European Union officials are also discussing new rules for advanced AI systems, especially those with strong cyber capabilities.
Industry experts say banks will now face growing pressure to modernize outdated systems, strengthen cyber defenses, and improve internal monitoring. Many believe financial institutions that fail to adapt quickly could become more vulnerable as AI technology continues to evolve.
BaFin’s announcement signals that regulators are moving beyond theoretical discussions about artificial intelligence and are beginning to take direct supervisory action. The inspections are expected to increase pressure on banks across Germany to show they are prepared for a new era of AI related cyber threats.