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The potential impact of frontier AI on cyber risk is the most immediate concern to the financial system, says FSB Chair, Andrew Bailey.
Andrew Bailey, Chair of the Financial Stability Board (FSB), has issued a significant warning to G20 Finance Ministers and Central Bank Governors regarding the emerging risks from frontier Artificial Intelligence (AI) models. A primary and immediate concern for the global financial system is the potential amplification of cyber risk by these advanced AI models, which are demonstrating increasingly sophisticated autonomous and problem-solving capabilities, including the capacity to generate threats. Beyond AI-specific risks, Bailey also highlighted broader market vulnerabilities. He noted that the ongoing Middle East conflict has intensified energy-driven inflationary pressures, making markets susceptible to a potentially disruptive and cross-border correction. This vulnerability is further exacerbated by existing fragilities in sovereign debt markets, growing concerns in private credit, and elevated asset valuations, particularly in sectors related to AI. The letter specifically cautions that the recent surge in leverage utilization within bond and equity markets, combined with high valuations, market concentration, and an optimistic sentiment surrounding AI, could significantly magnify the impact of any future market downturn. Bailey therefore urged national authorities to implement proactive measures to ensure the safe and responsible deployment of these AI models. Additionally, he stressed the critical importance for financial institutions to maintain robust response and recovery capabilities and to ensure resilience among their vital third-party technology and common service providers. The FSB is committed to investigating and addressing these complex challenges within its defined mandate and expertise to safeguard financial stability.
This section provides essential background information on the Financial Stability Board (FSB). The FSB is an international body responsible for coordinating the efforts of national financial authorities and various international standard-setting organizations. Its core mandate involves developing and promoting the implementation of effective regulatory, supervisory, and other financial sector policies, all aimed at fostering global financial stability. The Board comprises national authorities from 24 diverse countries and jurisdictions, alongside key international financial institutions, specialized groupings of regulators and supervisors, and committees of central bank experts. Complementing its direct membership, the FSB also extends its engagement through six Regional Consultative Groups, maintaining outreach with approximately 70 additional jurisdictions worldwide. The current Chair of the Financial Stability Board is Andrew Bailey, who also serves as the Governor of the Bank of England. The FSB's central Secretariat operations are based in Basel, Switzerland, and are hosted by the Bank for International Settlements.