# Financial Fragility in Societies of LLM Agents: Coordination Failures and Stabilizing Mechanisms

arXiv: https://arxiv.org/abs/2609.30940 · HTML: https://mlsanity.com/paper/2609.30940/

## Key facts

- No citing papers in the map yet (data through 14 Oct 2026).
- Placed in Financial trading and forecasting agents, one of 16 directions in LLM agents and tool use.
- Builds on 14 of its 29 references that are in the map.
- First posted on arXiv 25 Sep 2026.

## Placed in

- LLM agents and tool use / [Financial trading and forecasting agents](https://mlsanity.com/agents/financial-trading-and-forecasting-agents/)

## Builds on (most cited first, 14 of 14)

- [Why Do Multi-Agent LLM Systems Fail?](https://mlsanity.com/paper/2503.13657/) (2025)
- [Playing repeated games with Large Language Models](https://mlsanity.com/paper/2305.16867/) (2023)
- [FinMem: A Performance-Enhanced LLM Trading Agent with Layered Memory and Character Design](https://mlsanity.com/paper/2311.13743/) (2023)
- [Multi-Agent Risks from Advanced AI](https://mlsanity.com/paper/2502.14143/) (2025)
- [A Multimodal Foundation Agent for Financial Trading: Tool-Augmented, Diversified, and Generalist](https://mlsanity.com/paper/2402.18485/) (2024)
- [Cooperate or Collapse: Emergence of Sustainable Cooperation in a Society of LLM Agents](https://mlsanity.com/paper/2404.16698/) (2024)
- [Welfare Diplomacy: Benchmarking Language Model Cooperation](https://mlsanity.com/paper/2310.08901/) (2023)
- [The Machine Psychology of Cooperation: Can GPT models operationalise prompts for altruism, cooperation, competitiveness and selfishness in economic games?](https://mlsanity.com/paper/2305.07970/) (2023)
- [Corrupted by Reasoning: Reasoning Language Models Become Free-Riders in Public Goods Games](https://mlsanity.com/paper/2506.23276/) (2025)
- [CoopEval: Benchmarking Cooperation-Sustaining Mechanisms and LLM Agents in Social Dilemmas](https://mlsanity.com/paper/2604.15267/) (2026)
- [Evaluating Generalization Capabilities of LLM-Based Agents in Mixed-Motive Scenarios Using Concordia](https://mlsanity.com/paper/2512.03318/) (2025)
- [Spontaneous Giving and Calculated Greed in Language Models](https://mlsanity.com/paper/2502.17720/) (2025)
- [When AI Agents Collude Online: Financial Fraud Risks by Collaborative LLM Agents on Social Platforms](https://mlsanity.com/paper/2511.06448/) (2025)
- [Social Contagion and Bank Runs: An Agent-Based Model with LLM Depositors](https://mlsanity.com/paper/2602.15066/) (2026)

## Abstract (arXiv)

Individually protective decisions can produce avoidable collective failures. As large language model (LLM) agents take on greater roles in financial decision-making, financial AI safety must therefore be considered not only at the level of individual agents, but also at the level of the systems they jointly create. We study this problem with FRAIL, a controlled experimental framework that places LLM agents in three dynamic financial environments---bank runs, debt rollover, and reward crowdfunding---where agents' decisions reshape the financial conditions faced by others. Across seven leading LLMs, we find widespread collective fragility even when no agent is instructed to destabilize the system: 77% of baseline bank-run episodes and 83% of debt-rollover episodes end in failure. We then compare three interaction mechanisms based on compensated commitments, centralized commitment agreements, and participant-led coalitions. All three improve aggregate outcomes, but no single mechanism performs best across all financial structures. Across mechanisms, successful stabilization shares a common temporal pattern: broad commitment forms early, before defensive behavior becomes self-reinforcing. Our findings show that individually capable agents do not automatically form safe financial systems, highlighting system-level evaluation and interaction design as central problems for financial AI safety. Code is available at https://anonymous.4open.science/r/FinFrail-CF26.