Bank of England Governor Andrew Bailey has cautioned G20 finance ministers that artificial intelligence (AI) poses a significant risk of causing a global economic downturn and presents substantial cybersecurity threats to financial systems. Bailey warned that any contraction in the AI sector could trigger a worldwide market correction.
Addressing finance ministers in the United States, Bailey emphasized the need for companies globally to prepare for cybersecurity breaches that could lead to simultaneous disruptions across numerous firms. This warning follows an earlier call from approximately 100 companies, including major AI developers like Google, Microsoft, Anthropic, and OpenAI, urging nations to bolster their cyber defenses against increasingly powerful AI capabilities.
Bailey pointed to a confluence of factors that could exacerbate a future market correction: highly valued stock markets, increased investor borrowing, and the growing concentration of capital within a few dominant technology companies. He noted that high leverage interacting with elevated valuations and market concentration, particularly the cross-investment between AI firms and hyper-scalers, could amplify market downturns.
"The issue is not simply that investors are borrowing more, but that leverage is interacting with high valuations and market concentration, in particular the increasing cross-investment between artificial intelligence (AI) companies and hyper scalers, in a way that could amplify a future market correction," Bailey stated. He urged financial security leaders to develop measures that support the safe and responsible global release and deployment of AI models.
Bailey also voiced concerns about volatility stemming from energy supply shocks, citing the US-Iran war as an example. This broader economic instability adds another layer of complexity to managing the integration of AI into global financial infrastructures.
In parallel efforts to foster domestic AI capabilities, the UK has announced initiatives such as a £100 million fund to support British AI startups. This program aims to develop homegrown AI technology to reduce reliance on foreign services and address national challenges, including improving NHS waiting lists and strengthening cybersecurity and defense. A UK government spokesperson indicated that its AI economics institute is collaborating internationally to enhance the understanding of AI's economic transformations and its impact on growth, productivity, jobs, and public services.