Bank of England warns AI poses growing threat to financial stability

The Bank of England’s Financial Policy Committee said on July 7 that artificial intelligence is a new, dual‑edged risk for the UK financial system. Its half‑yearly stability report highlighted rapid AI advances, rising leverage in equity markets and heavy borrowing by AI‑related firms as factors that could amplify market volatility and cyber‑operational threats. Deputy Governor Sarah Breeden called for bespoke regulation and “guardrails” such as circuit‑breaker‑type mechanisms to contain autonomous (agentic) AI systems that might trigger market‑wide meltdowns.

European central bankers echoed the concerns. The European Central Bank, the Bank for International Settlements and the International Monetary Fund warned that the speed of AI innovation outpaces traditional rule‑making, and that debt‑asset mismatches could fuel disruptive feedback loops if AI‑driven asset prices fall sharply. The UK’s Financial Conduct Authority also released the Mills Review, noting that about 20 % of UK adults are open to AI‑driven financial decisions while stressing the need for robust consumer safeguards and oversight.

Regulators therefore proposed tighter capital treatment for AI‑linked exposures and are exploring new supervisory tools to monitor autonomous models, aiming to preserve market resilience while fostering responsible AI adoption.