Moody's warns banking sector is building systemic dependency on AI vendors
Moody’s warns banking sector is building systemic dependency on AI vendors #
Moody’s has warned that banks’ rapid adoption of artificial intelligence is creating a structural vulnerability through heavy reliance on a small group of AI model and cloud providers.
In a research note, the rating agency argued that because so many financial firms are drawing on the same narrow set of foundation model and cloud suppliers, a “systemic dependency” is forming. An outage at any one of those providers could spread rapidly across customers and entire sectors, Moody’s said, with stability implications that extend beyond individual institutions.
The agency named OpenAI and Anthropic, noting that both companies remain loss-making and face mounting pressure from investors to reach profitability. Moody’s said that financial dynamic could give those vendors leverage over the pricing terms of the banks and insurers building on their platforms, a risk it calls “vendor dependence.” The agency warned that “a set of dominant AI model and infrastructure providers could, over time, exert control over the price of AI services.”
More than three-quarters of UK financial services firms are already using AI, according to a UK Treasury select committee report, with insurers and international banks among the heaviest users. Banks are now deploying AI in insurance claims processing and credit assessments, not just administrative tasks, which means a provider failure could disrupt core financial operations rather than peripheral ones.
Moody’s also flagged data privacy breaches, cybersecurity exposures, and AI-enabled fraud as risks accompanying the AI build-out. The agency identified an additional concern specific to banking: AI tools that help consumers identify and switch to higher-yielding accounts could trigger rapid deposit outflows, putting funding stability under pressure at moments of stress.
Moody’s does not argue that AI is a net negative for banks. It expects the technology to eventually cut costs and lift revenues across the sector, but warns that competitive dynamics, with rival lenders converging on the same tools, will erode much of the financial upside over time.
Some lenders are working to reduce their exposure. Moody’s acknowledged that large banks and insurers have experience negotiating technology contracts, and that some are turning to open-source AI models and strategic partnerships to avoid dependence on any single commercial provider.
Regulators appear to be moving in the same direction. HM Treasury has proposed an assurance framework covering third-party AI and the scrutiny of critical technology providers, a step toward formal supervisory policy on AI concentration.
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