The Governor of the Bank of England, Andrew Bailey, has warned that overvalued AI stocks could lead to a "bubble" that risks financial stability, while also highlighting increased cyber attack risks from the technology.
Financial stability concerns
Speaking at the Swiss Institute of International Studies lecture series at the University of Zurich, Bailey said AI poses financial stability risks that make it an issue of importance to central banks. He noted that "frontier AI has increased the risk from cyber-attacks – something that was already prominent."
Bailey also expressed concerns that AI could undermine public trust, calling this "critical." He called for "more extensive model testing" before and after release, as well as "better incident reporting, monitoring and follow up" for AI tools.
Cyber attack warnings
His remarks follow a warning from the National Cyber Security Centre that Britain could face AI-boosted attacks on critical national infrastructure within the next two years. Chief executive Richard Horne said vulnerabilities can be "discovered and exploited at a scale that was once unimaginable" because of AI.
Bailey also addressed the risk of an "asset price bubble in AI," noting that companies may be overvalued in financial markets or that investor returns may take longer to materialise than expected. "There are good reasons to believe that the world moves faster now, but still the timing may not live up to market expectations," he said.
Optimism on AI
Despite the risks, Bailey described himself as an "optimist on AI, digital technology and most probably robotics too." He said these technologies "have the potential to lift the sustainable growth rates of many economies through raising productivity growth," adding, "That is a good thing."
