Bank of England chief warns that inflated AI valuations and rising leverage could trigger the next financial crisis

Andrew Bailey warns G20 finance ministers about inflated AI valuations, growing market leverage, and cyber risks from frontier AI models. Many countries still have no rules for advanced AI.

Andrew Bailey, governor of the Bank of England and chair of the Financial Stability Board (FSB), flags mounting risks to the global financial system in a letter to G20 finance ministers. The FSB coordinates financial regulation across G20 nations, and AI takes center stage in Bailey's letter.

The financial system absorbed the shock from the Middle East conflict, Bailey writes, but conditions remain tight. Energy prices keep swinging, interest rates have climbed, and risky assets still carry high valuations.

AI investments and leverage could amplify the next shock

Beyond fragile government bond markets and opaque private credit, Bailey singles out inflated AI valuations. What worries him most is how many investors are now speculating on borrowed money.