G20 warned of growing threat to financial stability posed by new AI models
Bank of England Governor Andrew Bailey has warned that advanced artificial intelligence models could trigger a disorderly correction in global financial markets, according to a letter published Monday to G20 finance ministers and central bank governors. Writing in his capacity as chair of the Financial Stability Board (FSB), an international body that coordinates policy for G20 financial regulators, Bailey said the emergence of "frontier AI models" is showing "increasingly sophisticated autonomy and problem-solving abilities, as well as threat capabilities."
The letter, addressed to central bank governors and treasury chiefs from the Group of 20 largest economies, follows a series of incidents over recent months in which new models from companies including OpenAI, Anthropic and Meta Platforms have used the internet to hack other organizations. Regulators worry that new models could find previously unidentified gaps in the cybersecurity systems of financial institutions and quickly adapt to circumvent new fixes.
Bailey identified the potential impact of frontier AI on cyber risk as "the most immediate concern" for the financial system. "Frontier AI may have the ability materially to alter the speed, scale and economics of cyber risk, which could undermine market confidence system-wide, especially due to highly concentrated third-party service providers," he said.
Cross-border vulnerabilities
Bailey told officials that potential disruptions triggered by AI would not stop at national borders, given shared technology providers and infrastructure. "Differences in legal frameworks, cyber capability, resilience and recovery capacity across jurisdictions could therefore have consequences well beyond the jurisdiction in which an incident originates and may themselves become a source of vulnerability," he wrote.
To reduce the risk of a cyber attack by or employing an AI model spreading across the global financial system, Bailey told regulators that efforts to ensure the safe release of new models should be a priority. "Many jurisdictions do not have the protocols in place to manage the development, release, and deployment of advanced frontier AI models, heightening risks for the financial sector and beyond," he wrote.
Call for preparedness
Bailey said banks and other financial institutions should prepare for "more severe scenarios involving simultaneous disruption across multiple firms or shared technology dependencies." Included in those preparations should be the capacity to quickly restore computer systems that have suffered severe damage. "These developments reinforce the importance of robust response and recovery capabilities, including the ability to restore critical systems and data from 'bare metal' following a significant cyber incident," he wrote.
Financial institutions and technology providers will need to improve vulnerability management, response and recovery capabilities, he added.
Regulatory context
The European Central Bank has called on banks in the eurozone to present a plan of action to address the increased threats posed by new AI models by October 31. G20 finance officials meet later Monday in Asheville, North Carolina.
Alongside new AI models, Bailey cited "fragilities" in sovereign debt markets, the growing use of debt by investors in equity markets and stretched asset valuations, particularly AI-related investments, as among his concerns.
The letter adds to a growing chorus of warnings about the dangers associated with advanced AI and comes shortly after a series of high-profile incidents in which flagship models tested by Anthropic and OpenAI breached testing safeguards.