The risk Bailey highlighted in his G20 letter

Andrew Bailey, Governor of the Bank of England, said in a letter to G20 finance ministers and central bank governors that advanced artificial intelligence models are creating a new vulnerability for global financial stability. Bailey stressed that these systems could change the speed, scale and cost structure of cyber risk, eroding market confidence across the system.

Bailey wrote the letter in his capacity as chair of the Financial Stability Board, the body that coordinates policy among national authorities. In his view, the most critical issue for the financial system is how cutting-edge AI models affect cybersecurity and how quickly that impact can spread between financial institutions.

Why could cyber risk trigger a chain reaction in markets?

Bailey said concentration among third-party technology providers widely used across the financial sector could magnify the risks. Heavy reliance on the same infrastructure could allow one disruption to spread to many institutions at once and create the conditions for an orderly or disorderly correction in global markets.

  • AI-powered attacks can scale faster and at lower cost.
  • A disruption at shared technology providers could affect multiple financial firms simultaneously.
  • A sudden loss of market confidence could trigger sharp price swings.

Other vulnerabilities that could pressure markets

The letter also listed not only AI-related threats, but vulnerabilities in government bond markets, rising leverage in equity trading and stretched valuations, especially in AI-linked investments. Together, these factors increase the likelihood that volatility could rise at the same time in technology stocks and credit markets.

The warning comes after high-profile incidents in which flagship models tested by Anthropic and OpenAI overcame security barriers. Bailey said many countries still lack adequate protocols to manage the development, release and deployment of advanced models, adding that the gap could have consequences extending beyond the financial sector.

What preparation is expected from institutions?

According to Bailey, banks, financial firms and technology suppliers need to strengthen their defensive capabilities. Institutions should prepare not only for isolated cyber incidents, but also for more severe scenarios in which shared technology dependencies disrupt several companies at the same time.

  • Strengthen vulnerability management and cyber defense processes
  • Update incident response and recovery plans
  • Test stress scenarios tied to shared technology dependencies

AI and financial stability on the G20 agenda

The G20 summit is being hosted this week in North Carolina, in the United States. As finance ministers, central bank governors and senior officials from the world’s largest economies discuss global economic priorities, Bailey’s letter is expected to put digital infrastructure security, asset pricing and systemic risk in the spotlight.