Bank of England governor Andrew Bailey has warned that rapid growth in artificial intelligence could create new risks for the global financial system.

In a letter to G20 finance ministers and central bank governors, Bailey said financial markets remain vulnerable to a sharp correction that could spread between countries. His concerns include high asset valuations, increased borrowing by investors and the concentration of investment in a relatively small number of major technology and AI businesses.

Bailey said these factors could magnify any fall in AI-related company valuations, particularly where firms and investors are heavily exposed to one another.

He also highlighted the growing cyber security risks linked to advanced, or “frontier”, AI models. These systems are becoming more autonomous and capable, which could increase the speed and scale of cyber attacks. Because financial firms often rely on the same technology providers, a serious incident could potentially disrupt several businesses at the same time.

Bailey made the comments in his role as chair of the Financial Stability Board, an international organisation that monitors risks to the global financial system.

The warning does not suggest that a downturn is inevitable. Instead, the Financial Stability Board is calling for stronger resilience, greater international co-operation and measures to support the safe development and deployment of advanced AI.

For businesses, the comments underline the growing importance of managing both financial exposure and cyber security as AI becomes more widely used.

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