AI could cause global economic downturn, Bank of England head warns

Bank of England Governor Andrew Bailey has expressed concerns over the potential risks that advanced artificial intelligence (AI) may pose to the financial infrastructure. In a letter sent to G20 finance ministers and central bank governors, Bailey warned of multiple "fragilities" in the financial system, including stretched asset valuations in the AI market and the interconnection of large language models with cyberattacks.

He emphasized that the interconnected nature of major financial institutions, which frequently conduct transactions using technology from the same third-party providers, could make them vulnerable to cyber threats originating from a single key provider. The letter also suggested that AI models' ability to quickly identify software vulnerabilities necessitates a faster rollout of patches, a task that is currently challenging due to the extensive manual work involved.

Bailey urged decision-makers to prepare for potential disruptions affecting multiple financial institutions or technology suppliers at once, and recommended implementing workflows to restore critical systems and data following a significant cyber incident. The letter highlights that while AI offers opportunities to enhance cyber defense, the rapid advancements in the field also require corresponding improvements in resilience and preparedness.