BoE Warns AI-Related Debt Risks UK Financial Stability

The Bank of England (BoE) has warned that rapid growth in AI-related debt and recent security concerns pose a risk to UK financial markets' stability.

Rapid increases in the level of AI-related debt have combined with recent security concerns around the technology, posing a threat to interconnected financial stability, according to the BoE. The central bank noted that the growing indebtedness of AI firms and their opaque financing arrangements could complicate risk analysis and amplify losses if they are unable to deliver.

The BoE also highlighted the increasing importance of private credit in funding AI-related investments, with Morgan Stanley analysts estimating that $700 billion of data centre capital expenditure between 2026 and 2028 will be funded by private credit. The bank warned that the complex interlinkages between funds and traditional banks pose a threat to global financial stability.

The BoE also noted that AI models are increasing the threat of cyber and operational risks to businesses, with recent high-profile hacks conducted by frontier labs' models during testing highlighting the potential for containment, monitoring, and governance arrangements to be challenged further as their capabilities increase.