Reading The Defence: The 2025 Systemic Risk Report

The Canadian Securities Administrators Systemic Risk Committee (SRC) has released its 2025 Annual Report on Capital Markets (Report), which includes an analysis of capital market trends and vulnerabilities, as well as the CSA's mitigation efforts, confirming that risk is still very much present in the Canadian arena.

Of particular interest to registrants, the Report indicates that while AI can reshape financial systems, being used by major players for asset allocation, fraud detection and algo trading, it also brings risks. For example, concentration risk resulting from a small number of firms that control cloud infrastructure, GPU computing, and AI models. The expanded use of AI by financial institutions and other market participants also increases cyber risks, while at the same time, AI is being used to scale cyber attacks. It is specifically noted that regulators must balance supporting growth in AI while avoiding AI becoming a source of financial instability.