By COMFORT OGBONNA
The growing use of artificial intelligence poses an immediate and potentially significant cybersecurity threat to the global financial system, Financial Stability Board Chair Andrew Bailey said Monday, warning that advanced AI could fundamentally change the speed, scale and economics of cyberattacks.
Bailey, who also serves as governor of the Bank of England, said financial regulators and governments need to ensure that safeguards and resilience measures keep pace with the rapid development of increasingly capable AI systems.
In a letter to finance ministers and central bank governors from the Group of 20 major economies ahead of meetings this week, Bailey said many countries still lack adequate systems for overseeing and managing the deployment of advanced artificial intelligence models.
The Financial Stability Board, an international body responsible for monitoring vulnerabilities in the global financial system, has increasingly focused on the potential risks posed by new technologies, particularly as banks and other financial institutions become more dependent on automated systems and external technology providers.
Bailey said the growing concentration of financial-sector infrastructure among a relatively small number of powerful technology companies could create additional vulnerabilities. A major disruption at one of those providers could affect multiple financial institutions simultaneously and potentially undermine confidence across markets.
The concern extends beyond conventional cyberattacks. More advanced AI systems could help identify software weaknesses more quickly, potentially allowing attackers to discover and exploit vulnerabilities at a speed that traditional cybersecurity defenses may struggle to match.
At the same time, AI could accelerate the discovery of vulnerabilities by legitimate security researchers and force companies to identify and patch weaknesses more rapidly. That could create new operational challenges for financial institutions if their testing, monitoring and recovery systems are unable to keep pace with the technology.
Bailey said recent developments demonstrate the importance of ensuring that advances in AI capabilities are accompanied by corresponding improvements in resilience and preparedness.
He called for the safe and responsible release of increasingly powerful AI models to be treated as a global priority, emphasizing that the risks associated with the technology do not stop at national borders.
The warning comes as governments and technology companies continue to deploy increasingly sophisticated AI systems capable of performing tasks with limited human supervision.
Concerns about AI systems operating beyond their intended safeguards have also intensified following incidents involving autonomous AI agents during controlled testing. Such episodes have raised questions about whether advanced systems could potentially find ways around restrictions imposed by their developers and whether existing cybersecurity controls are sufficient to contain them.
For financial institutions, the potential consequences could be particularly serious. Banks, insurers, investment firms and market infrastructure providers increasingly rely on interconnected digital systems to process transactions, manage customer accounts and operate critical financial services.
A successful attack against a major institution or technology provider could therefore have effects extending well beyond the original target.
Bailey also reiterated concerns about broader financial-market vulnerabilities, warning that the global system remains exposed to the possibility of sharp market corrections.
He pointed to elevated valuations in parts of the artificial intelligence sector as one area of concern, particularly if investor expectations about the pace of AI-related growth prove too optimistic.
Government debt markets also remain a source of vulnerability, with rising borrowing costs potentially placing additional pressure on heavily indebted governments and financial institutions holding large amounts of sovereign debt.
Bailey further identified increasing use of leverage in equity markets as an emerging risk. Greater leverage can amplify gains when asset prices rise but can also accelerate losses when markets turn lower, potentially increasing volatility and forcing investors to sell assets rapidly.
Recent movements in long-term government bond yields have added to concerns about financial-market stability, particularly as investors reassess expectations for inflation, interest rates and government borrowing.
The combination of elevated asset valuations, increased leverage, large government debt burdens and rapidly advancing technology presents a complex set of challenges for financial regulators.
Bailey’s comments underline the difficulty facing policymakers as they attempt to encourage technological innovation while preventing new risks from developing faster than the safeguards designed to contain them.
For the financial system, the challenge is not simply preventing individual cyberattacks but ensuring that increasingly interconnected institutions can withstand disruptions without allowing them to spread across markets.
As AI becomes more deeply embedded in financial services, regulators are likely to face growing pressure to establish common standards for model security, testing, deployment and recovery.
The pace of AI development means those standards may also need to evolve rapidly. Bailey’s warning suggests that policymakers are increasingly focused on ensuring that the global financial system is prepared for technological risks before they develop into threats capable of destabilizing markets.
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