Artificial intelligence is embedding itself in finance for credit, trading, fraud detection and risk management, creating risks of “algorithmic contagion” in which shared models, datasets and cloud infrastructure could synchronise institutional behaviour and amplify shocks faster than traditional leverage-based crises.

Historical episodes such as the 2010 Flash Crash, the Knight Capital malfunction and the 2024 CrowdStrike outage illustrate how automated or concentrated digital systems can transmit rapid, cross-border losses; similar herding and procyclical effects are now a concern for AI-driven markets.

Southeast Asian central banks are deepening SEACEN cooperation on trustworthy AI governance, stress-testing and oversight of critical technology providers, recognising that digital interconnection requires regional rather than purely national safeguards so that innovation does not outpace resilience.

Financial crises have long spread through familiar channels: excessive leverage, fragile balance sheets, liquidity shortages, and sudden shifts in market sentiment. The 1997 Asian Financial Crisis and the 2008 Global Financial Crisis demonstrated how instability in one segment of the financial system can rapidly spread across institutions, markets, and borders. Today, however, a new source of contagion is emerging. As artificial intelligence becomes deeply embedded in modern finance, future instability may spread not through banks alone, but through algorithms.

Artificial intelligence is no longer a futuristic concept in finance. Banks, asset managers, payment providers, and fintech companies increasingly rely on AI for credit assessment, fraud detection, customer service, investment decisions,........

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