Bank of England Governor Andrew Bailey has warned that frontier artificial intelligence models pose a material threat to global financial stability, arguing that the most advanced AI systems could fundamentally alter the speed, scale and economics of cyber-risk in ways that current governance frameworks are poorly equipped to handle.
Bailey made the case in a two-page letter addressed to G20 finance ministers and central bank governors ahead of their meeting in North Carolina this week, writing in his capacity as chair of the Financial Stability Board. He described frontier AI systems as displaying increasingly sophisticated autonomy and problem-solving capabilities alongside what he characterised as active threat capabilities, and warned that cyber-disruption driven by these models could spread rapidly across the highly interconnected global financial system.
The development was first reported by Theguardian. As reported by the Guardian, Bailey's letter drew particular attention to the concentration of third-party technology providers, cautioning that frontier AI could undermine system-wide market confidence if cyber-incidents cascaded through a small number of dominant platforms. He also pointed to a governance gap across jurisdictions, noting that many countries currently lack the protocols needed to manage the development, release and deployment of advanced AI models, a shortfall he described as heightening risks for the financial sector and beyond.
The letter arrives during a period of growing unease within the AI research community itself. Last month, more than 1,300 researchers and engineers at leading frontier labs including OpenAI, Anthropic and Google DeepMind signed an open letter cautioning that capability development could accelerate beyond humanity's ability to understand or control the resulting systems. They called for an internationally coordinated effort to develop the technical and governance tools needed to pace automated AI development responsibly.
Bailey extended his concerns to broader financial market vulnerabilities too. He flagged the increased use of leverage in bond and equity markets, noting its intersection with high valuations in concentrated markets partly inflated by investor enthusiasm for AI. A large shock, or a combination of shocks, could he warned simultaneously trigger multiple vulnerabilities across the system.
Bailey has served as Bank of England Governor since March 2020 and took on the FSB chairmanship last year. Based in Basel, the FSB coordinates national financial authorities and international standard-setting bodies to promote effective regulation in support of global financial stability.
