Bank of England governor warns frontier AI threatens global financial stability
Andrew Bailey, chair of the Financial Stability Board, has warned G20 finance ministers that advanced frontier AI models pose a growing risk to global financial stability, citing cyber threats and the potential for a market correction to spread across jurisdictions.
The Bank of England’s governor, Andrew Bailey, has warned international finance ministers and central bank governors that the most advanced artificial intelligence technology now poses a significant threat to global financial stability. In a two-page letter sent in his capacity as chair of the international Financial Stability Board (FSB), Bailey said “frontier” AI models were “showing increasingly sophisticated autonomy and problem-solving abilities, as well as threat capabilities”.
The letter, addressed to G20 finance ministers and central bank governors, highlights the risk of cyber-disruption spreading “across jurisdictions”. Bailey’s intervention adds to a growing chorus of regulators and policymakers who have expressed concern about the rapid deployment of cutting-edge AI systems in the financial sector. The FSB, which monitors and makes recommendations about the global financial system, has been examining the implications of AI for several years, but this is one of the most direct warnings yet from its chair.
Bailey also cautioned that a “future market correction” could spread across the world if the current AI investment bubble bursts. His remarks come amid intense debate about the valuation of AI companies and the scale of capital being poured into data centres, chips, and model development. A sudden repricing of these assets, he suggested, could have knock-on effects far beyond the technology sector, given the deep integration of AI into financial services, trading algorithms, and risk management systems.
The warning is particularly notable because of Bailey’s dual role as both the head of the UK’s central bank and the chair of the FSB, which coordinates financial regulation across the world’s major economies. The FSB has previously published reports on the opportunities and risks of AI in finance, noting that the technology can improve efficiency but also create new vulnerabilities, including herding behaviour, opaque decision-making, and concentration risk among a small number of AI providers.
The letter arrives at a moment when governments are scrambling to respond to the rapid advance of AI. The G20 has made financial stability a priority for its current presidency, and Bailey’s intervention is likely to shape the agenda at upcoming meetings. Regulators in the UK, the European Union, and the United States have all been developing frameworks for AI oversight, but the cross-border nature of the technology means that international coordination is seen as essential.
Bailey’s warning focuses on the specific characteristics of frontier AI models, which are distinguished by their scale, general-purpose capabilities, and ability to perform a wide range of tasks. These models are increasingly being used in financial applications, from customer service chatbots to complex trading strategies. However, their autonomy and problem-solving abilities also make them harder to control and predict, raising the prospect of failures that could cascade through the global financial system.
The Bank of England has not published the full text of the letter, but the summary of its contents has already drawn attention from financial markets and technology policy experts. The timing of the warning, just days before a scheduled meeting of G20 finance ministers, suggests that Bailey intends to push the issue up the international agenda. His message is clear: the benefits of AI must be weighed against the systemic risks it introduces, and regulators cannot afford to wait for a crisis before acting.
