Andrew Bailey, Governor of the Bank of England, has called on governments to increase testing of frontier AI models before their public release. He warned that advanced artificial intelligence poses sophisticated threats to banking, markets, and payment systems.
In a letter, Mr Bailey highlighted the “closed loop” nature of powerful AI tools, which he stated reduces “the ability of society to exercise meaningful oversight and intervention.” He emphasised that “Testing is essential if we are to understand the behaviour of increasingly complex systems, identify vulnerabilities and establish confidence in the safeguards that are intended to contain them.”
The Bank of England's Financial Policy Committee echoed these concerns, noting that the rapid development of AI, combined with the financial impact of the Iran war, has elevated the overall threat level to the global economy. The committee warned that the Middle East conflict, affecting energy prices and borrowing costs, has made a financial crisis involving simultaneous collapses in credit and stock markets more likely.
The Bank also highlighted the significant increase in AI-related debt, with hyperscalers projected to issue around $450bn this year. This figure is more than double the total issuance in 2025 and exceeds the UK government's projected gilt sales of $330bn for 2026. The committee's report stated that the combination of increasing leverage, opacity, and “circular arrangements” in AI financing could complicate risk assessment and “amplify losses if expectations disappointed.”