It’s still not magic: Framing the risks facing financial services in the Gen AI era

28 May 2026

The Institute and Faculty of Actuaries and the London Foundation for Banking and Finance (LFBF) have launched a report which introduces a new framework for understanding AI risks in financial services.

‘It’s still not magic’ acknowledges that generative AI presents opportunities as well as risks but points to “uncomfortable tensions” – where the same features that make the technology valuable also make it difficult to govern, explain, trust or contain.

The report builds on its 2019 predecessor and as part of the research, senior financial services practitioners and observers were surveyed. The research found that:

• 70% agreed “risks arising from the use of AI are among the greatest risks facing my sector over the next five years”.
• 75% agreed “the risks posed by AI to my sector have increased substantially since generative AI technologies have become widely available”.
• The top three risks highlighted were cyber threats, misleading outputs, and knowledge gaps.

The report’s AI risk framework therefore identifies nine risks which are grouped into three broad categories: ‘outcomes’, ‘operating environment’ and ‘system’. These provide a useful way to trace how AI risk moves through the financial services ecosystem: from the outcomes experienced by customers and society, to the environment in which firms deploy AI, to the system-level dynamics through which risks can scale and spread.

Read full report