31 August 2026

Bank of England chief warns AI valuations and leverage could spark financial crisis

• Andrew Bailey, governor of the Bank of England, told G20 finance ministers that inflated AI company valuations combined with rising borrowed money in markets create conditions for a severe downturn.
• Bailey's main worry is frontier AI, the most advanced models now gaining autonomous capabilities. These could make cyberattacks faster, cheaper and more damaging to the financial system.
• Banks worldwide rely on a handful of large technology providers for critical services. A successful cyberattack on one could hit financial institutions across multiple countries simultaneously.
• Many countries lack rules for developing and releasing advanced AI models, leaving gaps in preparation for AI-related financial risks that extend beyond finance itself.
• Unlike past tech crashes, the AI industry requires massive spending on physical infrastructure largely funded by debt. A market correction could ripple beyond investors into the broader economy.

Reported by The Decoder, CNBC, The Guardian, BBC News