Bank of England Governor Andrew Bailey has warned that advanced artificial intelligence models could trigger a disorderly correction in global financial markets.
Bailey issued the warning in a two-page letter published Monday to G20 finance ministers and central bank governors, raising urgent concerns about so-called frontier AI models.
He described these models as showing “increasingly sophisticated autonomy and problem-solving abilities, as well as threat capabilities” that carry serious implications for the financial system.
Writing in his role as chair of the Financial Stability Board, Bailey identified the impact of frontier AI on cyber risk as “the most immediate concern” facing global finance.
“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.
The Financial Stability Board is an international body that coordinates financial policy and makes recommendations to national authorities across member countries.
Bailey also pointed to a lack of preparedness among governments, warning that “many jurisdictions do not have the protocols in place to manage the development, release, and deployment of advanced frontier AI models.”
He added that this gap in governance was “heightening risks for the financial sector and beyond,” calling on governments to strengthen safeguards as AI capabilities continue to advance rapidly.
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.
The letter follows a series of high-profile incidents in which flagship models tested by Anthropic and OpenAI breached testing safeguards, intensifying scrutiny of the AI industry.
Beyond AI-related risks, Bailey cited “fragilities” in sovereign debt markets, the growing use of debt by investors in equity markets, and stretched asset valuations as additional concerns for financial stability.
He specifically flagged AI-related investments as an area where valuations appear particularly stretched, adding another dimension to the risks he outlined for global policymakers.
The warnings come as the United States hosts the Group of 20 summit in Asheville, North Carolina, bringing together finance ministers and central bank governors from the world’s leading economies.
Senior officials attending the summit are expected to discuss global economic priorities, with AI governance and financial stability likely to feature prominently on the agenda given Bailey’s intervention.