The governor of the Bank of England, Andrew Bailey, has warned G20 finance ministers that AI has the potential to trigger a global economic downturn and poses a significant cyber security risk to financial markets. He said that organisations should prepare for security breaches involving simultaneous disruption across multiple firms.
Writing in his capacity as chair of the Financial Stability Board, Bailey said the rapid development of advanced AI models could fundamentally alter the cyber risk landscape, increasing both the speed and sophistication of attacks against financial institutions.
In his letter, Bailey described frontier AI as “the most immediate concern from a financial stability perspective”, warning that the technology “may have the ability materially to alter the speed, scale and economics of cyber risk, which could undermine market confidence system-wide.”
He added: “Frontier AI offers significant opportunities to strengthen cyber defence; but recent developments highlight the importance of ensuring that advances in capability are matched by resilience and preparedness.
“Financial institutions, financial market infrastructures, and technology providers will therefore need to strengthen vulnerability management, response and recovery capabilities, and prepare for more severe scenarios involving simultaneous disruption across multiple firms or shared technology dependencies. 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, as well as the importance of resilience amongst critical third-party technology providers and other common service providers, on which the financial system depends.”
Alongside cyber security concerns, Bailey also highlighted growing financial market vulnerabilities linked to the rapid expansion of the AI sector. He warned that high valuations, increasing leverage and concentrated investment in AI-related companies could amplify the effects of any future correction if investor confidence weakens.
Source: cirmagazine.com
