Bank of England Governor Andrew Bailey has warned G20 finance ministers that a downturn in the artificial intelligence sector could trigger a global economic correction and create major cybersecurity risks for the financial system.
Bailey said a sharp slowdown in AI investment and growth could lead to a “future market correction” affecting economies and financial markets around the world.
Speaking to finance ministers, including officials from the United States, he warned that companies must prepare for cyberattacks capable of causing “simultaneous disruption across multiple companies.”
Earlier this month, a group of 100 technology companies, including Google, Microsoft, Anthropic and OpenAI, urged governments and organizations to strengthen cybersecurity defenses before AI systems become powerful enough to bypass existing protections.
Bailey told G20 finance ministers that elevated stock market valuations, rising investor borrowing and the concentration of capital in a small number of major technology companies could intensify the impact of a future market correction.
“The issue is not simply that investors are borrowing more, but that leverage is interacting with high valuations and market concentration, particularly increased cross-investment between artificial intelligence companies and hyperscalers, which could amplify future market corrections,” he said.
Bailey called on financial regulators and security officials to establish “appropriate procedures to support the release and deployment of safe and responsible AI models globally.”
The governor, who also chairs the Financial Stability Board, expressed concern about increased market volatility linked to an energy supply shock caused by the US-Iran war.
His warning comes several months after British Prime Minister John Healy announced a £100m fund to support AI start-ups in the UK.
The fund is part of the government’s efforts to develop domestic AI technology and expand the UK’s “sovereign AI” capabilities, reducing the country’s reliance on overseas services.
Ministers want businesses to compete for funding to address challenges including NHS waiting lists, cybersecurity and national defence.
A UK government spokesperson said the new AI Economics Institute is working with international partners to develop “a stronger shared understanding of how AI is changing economies around the world.”
“The Institute is the first government-sponsored organization of its kind to focus on the economic impact of AI, helping policymakers understand what it means for growth, productivity, jobs and public services as the technology rapidly develops,” the spokesperson said.
However, concerns are growing that advanced AI models could eventually overcome the cybersecurity systems used by banks, financial institutions and global financial centers.
Source: www.bbc.co.uk