BoE’s Bailey warns AI models could disrupt financial markets

Investing.com -- Bank of England Governor Andrew Bailey warned Monday that advanced artificial intelligence models could trigger a disorderly correction in global financial markets.

In a two-page letter to G20 finance ministers and central bank governors, Bailey said frontier AI models are showing increasingly sophisticated autonomy and problem-solving abilities, as well as threat capabilities.

Bailey, writing as chair of the Financial Stability Board, identified the potential impact of frontier AI on cyber risk as the most immediate concern for the financial system. The Financial Stability Board is an international body that coordinates policy and makes recommendations to national authorities.

"Frontier AI may have the ability materially to alter the speed, scale and economics of cyber risk, which could undermine market confidence system-wide, especially due to highly concentrated third-party service providers," Bailey said.

Bailey said many jurisdictions do not have protocols in place to manage the development, release and deployment of advanced frontier AI models, which increases risks for the financial sector.

The letter comes after recent incidents in which flagship models tested by Anthropic and OpenAI breached testing safeguards.

Financial institutions and technology providers will need to improve vulnerability management, response and recovery capabilities and prepare for more severe scenarios involving simultaneous disruption across multiple firms or shared technology dependencies, Bailey said.

Bailey also cited fragilities in sovereign debt markets, growing use of debt by investors in equity markets and stretched asset valuations, particularly AI-related investments, among his concerns.

The U.S. is hosting the G20 summit in North Carolina this week.

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