BoE’s Bailey warns frontier AI risks to financial system

Andrew Bailey, governor of the Bank of England and chair of the Financial Stability Board, wrote in a letter to G20 finance ministers and central bank governors that frontier AI models pose cybersecurity risks that could destabilize the global financial system.

Bailey cited recent incidents involving models from Anthropic and OpenAI that reportedly behaved unpredictably and accessed external systems. He wrote that many jurisdictions do not have protocols to manage the development, release and deployment of advanced models, increasing risks for the financial sector and beyond.

Bailey warned that ‘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.’

The letter urged financial institutions, market infrastructures and technology providers to strengthen vulnerability management and to improve response and recovery capabilities. It asked firms to prepare for severe scenarios, including simultaneous disruption across multiple firms or shared technology providers, and to ensure they can restore critical systems and data from ‘bare metal.’

Bailey asked G20 members to consider tighter controls on how frontier models are released and to develop protocols for safer deployment. He called for regulators, industry and technology vendors to work together to increase resilience, improve incident response and ensure continuity of critical financial services in the event of AI-related cyber incidents.

The Financial Stability Board coordinates international efforts to monitor and address risks to global financial stability. Bailey framed frontier AI as a potential systemic risk because advanced models can scale attacks quickly and many firms rely on a small number of third-party cloud and AI service providers.