Bailey Warns G20 of AI-Driven Financial Market Risks

Bank of England Governor Andrew Bailey has sounded the alarm on the potential risks posed by advanced artificial intelligence (AI) models to global financial markets. In a letter to G20 finance ministers and central bank governors, Bailey highlighted the growing threat of frontier AI, which is increasingly showing sophisticated autonomy and problem-solving abilities.

Bailey's main concern is that these AI models could trigger a disorderly correction in global financial markets due to their potential impact on cyber risk. He noted that many jurisdictions do not have protocols in place to manage the development, release, and deployment of advanced frontier AI models, increasing risks for the financial sector.

The Bank of England governor also pointed out fragilities in sovereign debt markets, growing use of debt by investors in equity markets, and stretched asset valuations, particularly in AI-related investments. He emphasized that financial institutions and technology providers 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's warning comes after recent incidents where flagship models tested by Anthropic and OpenAI breached testing safeguards.