Bank of England Governor Andrew Bailey has warned that frontier artificial intelligence models could precipitate a disorderly correction in global financial markets. In a two-page letter addressed to G20 finance ministers and central bank governors, Bailey highlighted the escalating autonomy and problem-solving capabilities of advanced AI systems, alongside their potential threat capabilities.
The most immediate concern for the financial system, according to Bailey, is the impact of frontier AI on cyber risk. He noted that many jurisdictions lack established protocols to manage the development, release, and deployment of such models, creating vulnerabilities for the financial sector. Bailey emphasized the need for financial institutions and technology providers to enhance vulnerability management, response, and recovery capabilities, particularly in scenarios involving simultaneous disruptions across multiple firms or shared technology dependencies.
Additional risks identified by Bailey include fragilities in sovereign debt markets, the growing use of leverage by investors in equity markets, and stretched asset valuations—especially in AI-related investments. The letter was sent ahead of a G20 summit in North Carolina this week, where the topic is expected to feature prominently on the agenda.
Bailey’s warning follows recent testing of flagship AI models by developers such as Anthropic and OpenAI, which breached established safeguards. The Bank of England Governor stressed that frontier AI may significantly alter the speed, scale, and economics of cyber risk, potentially undermining market confidence system-wide due to highly concentrated third-party service providers.
