Chinese banks’ DeepSeek adoption brings risk management challenges

DeepSeek’s lower cost will widen gen AI access in the banking sector, S&P said.

Chinese banks’ decision to embrace generative AI platform DeepSeek may bring cost savings, but could also bring about risk management challenges, warned S&P Global Ratings.

"Aggressive application [of generative AI] to credit approvals could bring potential asset quality problems that outweigh operational benefits," said S&P Global Ratings credit analyst Michael Huang.

As of February 2025, at least 19 Chinese lenders have sought to transform their business by implementing China's homegrown large-language model.

S&P expects that DeepSeek's lower-cost advantage will widen generative AI access in the banking sector over the next few years, particularly for some resource-constrained small banks.

Broader generative AI adoption will likely streamline certain resource-intensive tasks, it added.

But generative AI adoption could also endanger banks' risk controls.

Certain types of credit modeling and scorecard risk management have delivered mixed results in consumer and microfinancing, S&P said.

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