London, United Kingdom. The Bank of England said artificial intelligence poses a growing threat to financial stability as investors place heavy bets on the technology’s success and banks face greater exposure to cyberattacks. The central bank nevertheless judged that Britain’s banking system remained resilient.
Existing and emerging risks
In its half-yearly assessment of risks to Britain’s financial system, the Bank of England said previously identified threats from stretched share valuations, high public debt and risky private credit lending to businesses remained.
Since its previous report, it said it had identified further risks from investors, including hedge funds, borrowing to purchase shares; AI-related companies taking on substantial debt to finance investment; and the rapid growth of AI’s capacity to cause harm.
AI investment concerns
The Bank said investor expectations for AI would require widespread profitable adoption of the technology, effective construction of new infrastructure and continued easy access to finance for the sector.
“A reassessment of these prospects could trigger a fall in equity prices that might be amplified by high concentration, correlated momentum-driven positions that can exacerbate volatility as markets fall, and increased leverage,” the Bank said.
It added that expectations for the future earnings of AI-related companies would be relevant to the sustainability of their debt, and said limited transparency over their borrowing could worsen a crisis.
Regulatory focus
Regulators worldwide have increasingly focused on AI’s cyber and operational risks, including risks linked to frontier models such as Anthropic’s Mythos and to agentic systems that can act with limited human intervention.
At the end of June, Bank of England Deputy Governor Sarah Breeden signalled for the first time that bespoke AI regulation may be needed to contain risks from increasingly capable agentic systems.
“Our frameworks were not built to contemplate autonomous agents, and relying on a human in the loop for all agent actions is unlikely to be realistic,” Breeden said.
Bank capital proposals
The Bank also set out proposals intended to make it easier for banks to reduce the capital they hold after a crisis, in order to sustain lending to the economy.
