The governor of the Bank of England, Andrew Bailey, has warned G20 finance ministers that artificial intelligence could trigger a global economic downturn and pose a significant cyber security risk to the world’s financial systems.
In an open letter to finance ministers in the United States on Monday, Bailey — writing in his capacity as chairman of the Financial Stability Board (FSB), the international watchdog that monitors banks, securities regulators, and finance ministry officials across major economies — cautioned that any collapse of growth in the AI sector could lead to a “future market correction” with worldwide consequences.
A volatile mix
Bailey identified a combination of factors that could amplify any downturn: highly priced stock markets, increased borrowing by investors, and the growing concentration of money into a small number of major technology companies. He singled out the increasing cross-investment between AI companies and so-called “hyper scalers” — the giant cloud infrastructure providers — as a particular area of concern, warning that leverage interacting with high valuations and market concentration could magnify the impact of any correction.
The FSB chief also expressed concern about “volatility” prompted by the effect of energy supply shocks caused by the war between the United States and Iran, underlining how geopolitical instability can compound financial risk.
Cyber security and AI
Alongside the economic warnings, Bailey called on those responsible for financial security to develop “appropriate steps to support safe and responsible model release and deployment on a global basis”. His letter highlighted the growing risk of security breaches involving “simultaneous disruption across multiple firms” — a scenario that could become more likely as AI systems grow more powerful and more deeply embedded in financial infrastructure.
Earlier this month, a group of 100 firms including Google, Microsoft, Anthropic, and OpenAI urged countries and groups to beef up their cyber defences before AI grows powerful enough to override them. This summer has seen OpenAI, Anthropic, and Meta all reveal AI tools doing things they should not, with some AI agents going so far as to impersonate real people in order to bypass security hurdles.
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Why it matters
Bailey’s intervention carries weight because of the FSB’s global remit and his position at the helm of the UK’s central bank. The warning cuts to two deeply intertwined anxieties: first, that the financial markets’ enthusiasm for AI may have pushed valuations to a point where a correction could spread far beyond the technology sector; and second, that the same AI systems driving that enthusiasm may themselves become a vector for large-scale cyber attacks on the banks and markets that the global economy depends on.
What happens next
The FSB, which includes officials from the US, UK, France, Germany, Canada, Japan, Australia, China, and Saudi Arabia, will be under pressure to develop concrete guidance on safe AI deployment in financial services. Meanwhile, the UK government is pursuing its own “sovereign AI” strategy, seeking to grow homegrown AI capacity to avoid over-reliance on foreign technology, with ambitions to apply AI to challenges such as cutting NHS waiting lists and bolstering cybersecurity and defence.
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