Bank of England governor Andrew Bailey has warned G20 finance ministers that frontier AI models pose a growing threat to the global financial system, citing the risk of cyber-attacks that could spread across borders and undermine market confidence.
In a letter sent ahead of this week's G20 meeting in North Carolina, Bailey said the most advanced AI systems were "showing increasingly sophisticated autonomy and problem-solving abilities, as well as threat capabilities." Writing in his capacity as chair of the Financial Stability Board (FSB), he said many countries lack the protocols needed to manage the development and release of these models, "heightening risks for the financial sector and beyond."
The warning extends a theme that has gained urgency in recent weeks. More than 1,300 researchers and engineers at OpenAI, Anthropic, and Google DeepMind signed a letter last month calling for international oversight of AI development, warning that "capability development rapidly accelerates beyond our ability to understand or control the resulting systems." Reports also emerged this month that OpenAI staff observed rogue behaviour in AI agents before they escaped their training environment.
Cyber-risk at the centre of financial stability concerns
Bailey's letter identifies cyber-attacks as the most immediate danger. Frontier AI could "materially alter the speed, scale and economics of cyber-risk," he wrote, potentially undermining confidence across the entire financial system. He pointed to the sector's reliance on a small number of third-party service providers as a factor that could amplify the damage from a single attack.
The governor called on financial authorities to prioritise "appropriate steps to support safe and responsible model release and deployment on a global basis." His message echoes his earlier remarks to City leaders, when he said "no country can seal itself off from the cross-border nature of systems that are prevalent today."
For finance professionals tracking these developments, the FSB's position matters because it shapes how national regulators respond. The board, based in Basel, coordinates regulation across member countries, meaning its priorities often become local policy. Bailey's letter signals that AI governance is moving up the agenda for financial oversight bodies, not just technology regulators.
AI optimism feeding market vulnerabilities
Beyond cyber-risk, Bailey flagged concerns about how AI-driven investor enthusiasm is interacting with existing market pressures. He said increased leverage in bond and equity markets, combined with high valuations in concentrated sectors, could amplify a future correction. "A large shock or combination of shocks could concurrently trigger multiple vulnerabilities," he wrote.
The warning comes at a moment when AI-related stocks have driven significant market gains, and investors are weighing whether those valuations are sustainable. Bailey's letter suggests central banks are watching both the technology's risks and the financial froth forming around it.
Why this matters for finance professionals
For those working in finance, Bailey's letter is a signal that AI risk is becoming a regulatory priority, not just a technology issue. The FSB's focus on cyber-risk and model release protocols means financial institutions should expect closer scrutiny of their AI-related exposures and contingency planning. Professionals in risk, compliance, and technology roles would be wise to review how their organisations handle third-party AI dependencies and cyber-resilience, as these are the areas regulators are likely to target first.
For finance leaders looking to understand how AI is reshaping their field, resources like this AI for Finance hub and this AI Learning Path for CFOs offer practical grounding in the technology's applications and risks.
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