Hassan Abdalla, Governor of the Central Bank of Egypt (CBE), said that the sweeping transformations driven by artificial intelligence—alongside the opportunities they present to enhance analytical and supervisory capabilities—also introduce a new set of risks. These include regulatory fragmentation, algorithmic bias, data-protection concerns and escalating cyber threats, all of which require robust digital infrastructure and adaptive legislative frameworks. Abdalla made the remarks during the 20th High-Level Annual Meeting on Financial Stability and Supervisory Priorities, held in Abu Dhabi and organised by the Arab Monetary Fund in cooperation with the Financial Stability Institute and the Basel Committee on Banking Supervision at the Bank for International Settlements. He underscored the importance of the issues discussed at the forum, noting that financial stability and evolving supervisory priorities have become a cornerstone of development ambitions across the Arab region. This comes at a time when the global economy is undergoing a complex transition marked by elevated inflation, volatile liquidity conditions and rapidly shifting geopolitical dynamics. The CBE governor said these pressures are particularly pronounced in the Arab world due to high public-debt levels and persistent fluctuations in exchange rates and oil prices, factors that directly affect public finances, economic activity and investor confidence. According to Abdalla, such challenges have compelled central banks to play a more expansive role in protecting monetary stability, reinforcing economic resilience and building more flexible financial systems capable of supporting growth, absorbing unexpected shocks and preserving market confidence. He also highlighted the rapid expansion of non-bank financial institutions, whose share now accounts for nearly half of global financial assets. While these entities act as key drivers of market development and contribute to economic growth and financial inclusion, they also pose heightened risks that require more advanced, transparent and forward-looking regulatory frameworks. Abdalla pointed to the accelerating pace of technological innovation, particularly the growing use of digital assets and stablecoins. He noted that their value has doubled over the past three years and that they now play an increasingly significant role in cross-border payments and transfers. Turning to recent global banking stresses, Abdalla referenced the banking tensions witnessed in 2023 following the collapse of four banks. He said these events exposed the limitations of traditional liquidity standards in an environment characterised by rapid digital withdrawals and instantaneous fund transfers across online platforms. The failures, he explained, were driven by a combination of weak governance, inadequate risk management, unsustainable business models and insufficient supervisory oversight. These developments underscore the need for updated stress-testing frameworks, stronger operational preparedness and more proactive supervision capable of identifying vulnerabilities at an early stage. Abdalla concluded by stressing that today's financial stability challenges are inherently cross-border and cannot be effectively addressed by any single country acting alone. Enhanced cooperation and coordinated action are therefore essential to developing shared visions that strengthen the resilience of Arab financial systems and enable them to manage emerging risks while embracing innovation that supports sustainable development.
