Daily Junction.mobi portalTechnology · July 16, 2026 · Amelia Hart · 2 min
Global cooperation needed to tackle AI threats, says Bank of England governor. A technology report — sourced from Guardian Technology.
The Governor of the Bank of England has called for a new framework of international cooperation to address the threats that artificial intelligence poses to financial stability, warning that the current patchwork of national regulations is inadequate to manage risks that cross borders at the speed of code.
Andrew Bailey, speaking at a conference of central bankers and regulators in Basel, said AI had the potential to make financial markets more efficient but also more fragile. He identified three specific risks: the concentration of critical financial functions in a small number of AI systems, creating single points of failure; the potential for AI-driven trading algorithms to interact in ways that produce flash crashes; and the use of AI by malicious actors to conduct fraud or cyber attacks at a scale that would overwhelm current defences.
Bailey's intervention is significant because central banks have generally been cautious about commenting on AI, preferring to treat it as a technology issue rather than a financial stability concern. His remarks suggest that assessment is changing as AI becomes more deeply embedded in the operations of banks, insurers and trading firms.
The Governor proposed a three-part framework: mandatory stress testing of AI systems used in critical financial functions, similar to the capital stress tests that banks already undergo; a common set of transparency requirements so that regulators can understand how AI systems are making decisions; and an international agreement on liability when AI systems cause harm, modelled on the conventions that govern nuclear accidents and oil spills.
The Basel-based Financial Stability Board has been tasked with developing proposals for AI regulation, and Bailey's speech is seen as an attempt to shape that process before it produces recommendations. The challenge, as several central bankers noted in response, is that AI is developing faster than the regulatory process can accommodate.