Bank of England Governor Andrew Bailey, who also chairs the Financial Stability Board, warned G20 finance ministers and central bank governors that cyber risks tied to advanced AI models could interact with existing weaknesses in the global financial system. He said those vulnerabilities include high inflation, high interest rates and leverage in financial markets, and that together they could raise the risk of a severe shock.
Bailey also said current financial defenses could come under heavy strain if multiple financial institutions or shared technology providers suffered systemic disruptions at the same time. He pointed to the rapid improvement of AI-driven cyberattacks and identity fraud, while noting that some countries still lack mature regulatory frameworks covering the development, release and deployment of advanced AI models.
He added that elevated valuations linked to the AI boom, debt pressure in sovereign and private credit markets, and rising market leverage could all act as triggers for a disorderly market adjustment. Bailey urged financial institutions to deploy bare-metal backup systems that are physically separated from their main networks to improve recovery after a catastrophic cyberattack.
Bank of England Governor Andrew Bailey, who also serves as chair of the Financial Stability Board (FSB), warned G20 finance ministers and central bank governors that cyber risks linked to advanced AI models could combine with existing vulnerabilities such as high inflation, high interest rates and leverage in financial markets, raising the risk of a severe shock to the global financial system.
Bailey said current financial defenses could face a serious test if multiple financial institutions or shared technology providers were hit by systemic disruptions at the same time. He also warned that AI-driven cyberattacks and false-identity fraud are advancing quickly, while some countries have yet to establish mature regulatory frameworks for the development, release and deployment of advanced AI models.
He added that elevated valuations driven by the AI boom, debt pressure in sovereign and private credit markets, and the continued buildup of market leverage could become potential triggers for a disorderly adjustment in financial markets. Bailey recommended that financial institutions deploy bare-metal backup systems that are physically isolated from their primary networks to strengthen recovery capacity after a catastrophic cyberattack.
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