Bank of England governor Andrew Bailey has warned G20 finance ministers that high AI valuations and increasing financial leverage could intensify the next market decline. Bailey wrote in his role as chair of the Financial Stability Board, which coordinates financial regulation across G20 economies.
His concern is not simply that an AI company could be overvalued. Borrowed-money strategies, concentrated technology holdings and cross-investments between AI developers and large cloud providers could transmit one company's failure through equities, government bonds and the broader financial system. Bailey described rising leverage as a feature that can support gains but accelerate losses when sentiment reverses.
The letter also identifies frontier AI as a cybersecurity risk for banks. More capable models could lower the cost and increase the speed and frequency of attacks, while financial institutions across countries depend on a small number of technology providers. A successful attack on one shared provider could therefore have wide effects. Bailey noted that AI can assist defense as well, but called for safer release practices because many countries still lack rules governing advanced models.