Bank of England governor warns AI poses systemic threat to global finance

Andrew Bailey, the governor of the Bank of England, has issued a stark warning that advanced artificial intelligence models could destabilise the global financial system. Writing in his capacity as chair of the Financial Stability Board, Bailey cautioned international finance ministers and central bank governors about the growing risks associated with frontier AI. He stated that these models are demonstrating increasingly sophisticated autonomy and problem-solving abilities, alongside significant threat capabilities that could disrupt highly interconnected financial networks.

The concerns were outlined in a two-page letter sent to G20 finance ministers and central bank governors ahead of their meeting in North Carolina. Bailey highlighted that many jurisdictions currently lack the necessary protocols to manage the development, release, and deployment of these advanced models. This regulatory gap, he argued, heightens risks not only for the financial sector but for the broader economy. The governor emphasised that the cross-border nature of modern systems means no single country can isolate itself from these emerging threats, a sentiment that mirrors his previous calls for international cooperation to address AI-related dangers.

Bailey specifically identified cyber-risk as the most immediate concern for the financial system. He noted that frontier AI has the potential to materially alter the speed, scale, and economics of cyber-attacks. Such disruptions could undermine market confidence system-wide, particularly given the heavy reliance on highly concentrated third-party service providers. This warning aligns with recent alarm bells raised by prominent technologists and researchers. Last month, a letter signed by 1,367 researchers and engineers at major AI labs, including OpenAI, Anthropic, and Google DeepMind, expressed concern that capability development might accelerate beyond the ability to understand or control the resulting systems. They called for an international effort to develop governance tools to pace the frontier of automated AI development.

The governor’s letter also addressed the current state of financial markets, noting that increased use of leverage in bond and equity markets is combining with high valuations. These valuations are particularly fuelled by investor optimism regarding AI prospects. Bailey warned that this combination could amplify a future market correction. He expressed concern that a large shock, or a combination of shocks, could concurrently trigger multiple vulnerabilities within the financial system. The Financial Stability Board, based in Basel, Switzerland, coordinates the work of national financial authorities and international standard-setting bodies to develop effective regulation and policies in the interest of financial stability. Bailey, who has served as Bank of England governor since March 2020, was appointed chair of the FSB last year after previously heading the UK’s main financial regulators.