FSB’s Andrew Bailey says frontier AI’s cyber risk is ‘most immediate concern’

Financial Stability Board Chair Andrew Bailey warned G20 finance ministers and central bank governors on Monday that frontier artificial intelligence models pose an immediate threat to global financial stability by accelerating cyber risk. The FSB coordinates financial regulation across 24 jurisdictions.

In a letter published ahead of G20 meetings in Asheville, North Carolina, Bailey said frontier AI models are exhibiting advanced autonomy and problem-solving capacities alongside heightened threat capabilities.

"Frontier AI may have the ability materially to alter the speed, scale and economics of cyber risk, which could undermine market confidence system-wide, especially due to highly concentrated third-party service providers," Bailey, who also serves as Governor of the Bank of England, wrote.

The FSB noted that operational disruptions can spread rapidly across borders due to shared technology infrastructure, common third-party vendors, and cross-border financial connections.

Bailey stated that many jurisdictions lack protocols to manage the development, release, and deployment of advanced frontier AI models. He called on authorities to take appropriate steps to support safe and responsible model release on a global basis.

"These developments reinforce the importance of robust response and recovery capabilities, including the ability to restore critical systems and data from “bare metal” following a significant cyber incident, as well as the importance of resilience amongst critical third-party technology providers and other common service providers, on which the financial system depends," the FSB Chair noted.

The letter also flagged rising leverage in equities, including growing use of leveraged ETFs and momentum-driven strategies. Bailey said leverage, high valuations and market concentration, including growing cross-investment between AI companies and hyperscalers, could amplify a future correction.

Meanwhile, the FSB is looking at measures within its mandate to address these risks, including the safe use of frontier AI models for cyber defense in financial services and the sector’s ability to withstand and recover from major operational disruptions, according to Bailey.