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Bailey warns that AI models are getting better at exploiting vulnerabilities
Concentrated and intertwined investments could lead to a correction
Not all countries and entities are as well equipped as each other
Bank of England Governor Andrew Bailey has warned that frontier models are becoming a bigger risk to financial stability.
In a letter to G20 finance ministers and central bank governors ahead of a major meeting, Bailey warned that the increasing sophistication of AI models could be changing the speed, scale and impacts that cyberattacks could be having on the sector.
Bailey is especially worried about the interconnected nature of global finances together with AI systems that are quicker at discovering vulnerabilities, faster at exploiting them and more accessible to criminals.
Bank of England warns of AI's impacts on global economy
"The global financial system is highly interconnected, and cyber disruption can spread across jurisdictions through common technology providers, shared infrastructure, and cross-border financial activity," Bailey wrote, arguing that a concentration risk could increase the reach of any incidents.
Different countries also have significantly different levels of cyber resilience, regulation, incident response capabilities, legal protection and recovery readiness – so while one target country may be at a lower risk, other countries involved in an incident could compromise all others.
In his warning, Bailey argues that financial institutions should prepare for much more severe scenarios rather than smaller, more isolated cases.
His words also highlight a second, separate AI-related financial risk. Bailey argues valuations of risky assets remain elevated and is worried that a major shock, or multiple simultaneous shocks, could expose financial vulnerabilities. For example, multiple AI firms, cloud providers and chip companies are highly intertwined financially, and this cross-investment could be disastrous in any future corrections.
The G20 Finance Ministers and Central Bank Governors Meeting is now ongoing – any remedies or responses to the letter are yet to be confirmed.
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