LONDON — Bank of England Gov. Andrew Bailey called for authorities to retain the ability to intervene in artificial intelligence systems, warning that increasingly powerful models could threaten financial stability, disrupt payments and trading, and amplify cyberattacks.
Bailey’s comments came as the central bank’s Financial Policy Committee warned that mounting debt issued by AI companies was expanding investors’ exposure to the sector and creating interconnected financial risks, according to the Guardian.
The risks posed by frontier AI models are “real and increasingly significant,” Bailey said. He warned that public oversight was becoming more difficult as powerful systems operated within what he described as a “self-reinforcing loop,” the Guardian reported.
The technology has increased the scale and sophistication of cyberthreats to the financial system, potentially endangering everyday card payments, bank transactions, and stock and bond trading, he said.
Testing Before Regulation
Writing for the Bank of England’s Insight series, Bailey said AI’s potential benefits were immense, but society must retain the ability to establish boundaries for the technology and revise them as it develops.
He suggested rigorous testing of new models as a starting point to understand their behavior, identify potential failures and determine where authorities could intervene.
That knowledge eventually could inform standards applied consistently across the financial system and potentially the broader economy, the Guardian reported.
Bailey stopped short of advocating an immediate regulatory crackdown. He said debate over regulatory structures should follow an understanding of where failures occur.
“In the excitement surrounding AI development, there is a risk that we move too quickly to debates about regulatory architecture before establishing where the failure exists in the first place,” he wrote.
Bailey said standards could help protect the financial system from AI that operates outside established norms, obligations and responsibilities.
“Central banks have a responsibility to safeguard the stability of the system as a whole,” he said. “We cannot stand aside and assume that technological progress will resolve these questions on its own.”
Growing Debt Exposure
The Financial Policy Committee said major AI companies took on $450 billion in debt between January and September, according to the Guardian. That exceeded the $333 billion in British government bonds, known as gilts, scheduled to be issued during all of 2026.
The borrowing has tied hedge funds, asset managers and private credit firms more closely to AI companies’ fortunes, even as those businesses have yet to turn a profit, the newspaper added.
“The rapid increase in artificial intelligence-related debt issuance broadens the exposure of capital markets to development in AI,” according to minutes of the committee’s Sept. 25 meeting cited by the Guardian.
The committee called for timely and careful management of the intensifying, interconnected risks.
International Cooperation Faces Obstacles
Bailey’s warning comes amid growing calls from lawmakers, AI researchers and some technology companies for greater government oversight, the Guardian reported.
Prospects for international cooperation have weakened as President Donald Trump broadly rejected additional AI regulation, arguing it could undermine U.S. competition with China and threaten economic growth, according to the newspaper.
Bailey said authorities must address the risks now, before they become more difficult to contain.
