Dutch financial watchdogs warn of “toxic” risks from war and AI

Dutch central bank DNB, markets authority AFM and economic policy bureau CPB have jointly warned MPs that the Netherlands faces a mounting “toxic cocktail” of risks to its financial stability, citing the war in the Middle East, stock market concerns and AI-driven cyber attacks.

The three institutions published risk assessment reports that overlap closely, flagging the same set of worries: geopolitical tension, the threat of a sudden market correction, and the rapid growth of opaque corporate lending known as private credit.

DNB president Olaf Sleijpen described the combination as a “potentially toxic cocktail” in which one shock could amplify another. The central bank kept its overall warning at “code orange” but said banks could still be hit by the worsening Middle East conflict.

Economic damage already visible

A barrel of Brent crude oil now costs about 80% more than at the start of the year, and Dutch 10-year government borrowing rates have risen to roughly 3.3%, from 2.7% before the latest Middle East escalation, according to DNB.

The central bank estimates the Dutch economy could shrink by 1% in 2027 if the conflict deepens and energy prices stay high. In that scenario, the largest banks’ average core capital ratio would fall by about 2% to 15.7%, still well above regulatory minimums.

AI a “gamechanger” for cyberattacks

Sleijpen singled out generative AI as one of the most pressing new threats. The latest models can scan financial systems for security weaknesses and launch autonomous attacks at speeds that vastly outpace traditional defences, the central bank said.

Indirect exposure is also a concern: a bank may itself be well protected but vulnerable through its energy supplier or telecoms provider.

The AFM markets authority made similar points in its annual financial stability report, warning that AI is also making investment fraud easier to mount and harder to spot. The Dutch losses from investment scams already run to an estimated €750 million a year, the watchdog said.