Hassan Abdallah, Governor of the Central Bank of Egypt (CBE), said the fundamental transformation driven by artificial intelligence presents opportunities for AI to strengthen analytical and supervisory capabilities, but also brings new risks. These include regulatory fragmentation, algorithmic bias, data protection concerns, and growing cyber threats, all of which require robust digital infrastructure and adaptive legal frameworks.
Mr. Abdallah made the remarks at the 20th Annual High-Level Meeting on Financial Stability and Supervisory Priorities, held in Abu Dhabi by the Arab Monetary Fund in collaboration with the Financial Stability Institute and the Basel Committee on Banking Supervision of the Bank for International Settlements.
He underlined the importance of the issues discussed at the forum, noting that financial stability and evolving supervisory priorities are fundamental to the development ambitions of the entire Arab region. This comes at a time when the global economy is in a complex transition characterized by rising inflation, unstable liquidity conditions, and rapidly changing geopolitical dynamics.
The CBE Governor said these pressures were particularly pronounced in the Arab world due to high levels of public debt and persistent fluctuations in exchange rates and oil prices, factors that directly affect public finances, economic activity and investor confidence.
Abdallah said such challenges are forcing central banks to play a broader role in safeguarding financial stability, strengthening economic resilience and building more flexible financial systems that can support growth, absorb unexpected shocks and maintain market confidence.
He also highlighted the rapid expansion of non-bank financial institutions, saying their share now accounts for almost half of global financial assets. While these companies serve as key drivers of market development and contribute to economic growth and financial inclusion, they also pose increased risks that require a more sophisticated, transparent, and forward-looking regulatory framework.
Mr. Abdallah noted that the pace of technological innovation is accelerating, particularly the growing use of digital assets and stablecoins. He said it has doubled in value over the past three years and is now playing an increasingly important role in cross-border payments and remittances.
Turning to recent stresses in the global banking industry, Abdallah referred to the strains in the banking industry witnessed following the failure of four banks in 2023. He said these events exposed the limitations of traditional liquidity standards in an environment characterized by rapid digital withdrawals and instant fund transfers between online platforms. He explained that the failure was caused by a combination of weak governance, inadequate risk management, unsustainable business models and insufficient supervisory oversight. These developments highlight the need for modern stress testing frameworks, stronger operational readiness, and more proactive oversight that can identify vulnerabilities at an early stage.
Mr. Abdallah concluded by stressing that today's financial stability challenges are transnational in nature and cannot be effectively addressed by one country acting alone. Therefore, enhanced cooperation and concerted action are essential to build a common vision that will strengthen the resilience of the Arab financial system and enable it to manage emerging risks while embracing innovations that support sustainable development.
