Bank of England sees growing risk that dangers from AI and debt will materialise
The central bank said $450 billion in AI-related debt has broadened market exposure and that a bigger shock could trigger a sharper repricing.
- On Wednesday, the Bank of England warned that interconnected financial system vulnerabilities are crystallizing, citing the re-escalation of conflict in Iran and rapid growth in AI-related debt issuance.
- Global AI-related debt issuance reached around $450 billion in early September, double 2025 levels, while the FPC said the Iran conflict is driving a protracted negative supply shock.
- BoE Governor Andrew Bailey stressed the need for "rigorous model testing, conducted both before and after deployment" after an OpenAI agent hacked Hugging Face in July, increasing cyber risks.
- Deputy Governor Sarah Breeden stated "doing nothing is not an option" for the gilt repo market, where net borrowing totals around £200 billion; the FPC held its capital buffer at 2%.
- In early 2027, the BoE will produce detailed proposals for bank leverage and gilt repo reforms, though Breeden cautioned that some changes "will likely take years, not months" amid industry resistance.
29 Articles
29 Articles
Artificial intelligence is developing so rapidly that society may gradually lose its ability to effectively oversee its operation. If some advanced models get out of control, they could also pose a threat to the entire financial system, according to the Governor of the Bank of England, Andrew Bailey. In an extreme case, he said, the financial system could find itself in a situation where an uncontrolled AI model practically holds it “hostage.”
The Independent
The Independent (US)Bank of England boss issues stark warning on AI threat to UK economy
Governor Andrew Bailey said the technology could be a ‘very powerful weapon’ in the wrong hands
Bank of England: Bank of England sees growing risk that dangers from AI and debt will materialise
The Bank of England has identified rising risks in the financial system linked to geopolitical factors and AI debt. Central bank officials emphasized the need for cautious monitoring of interconnected vulnerabilities within financial markets. Recent increases in oil and gas prices have contributed to these risks. Proposed changes in leverage rules and gilt repo market regulations are set for consultation next year.
AI Valuations Could See ‘Sharper Correction,’ BOE Warns
Valuations in artificial intelligence remain vulnerable to a “sharper correction” than experienced in July, the Bank of England warned, noting the widespread implications of such a crash for global growth and sovereign bond yields.
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