Bank of England Governor Andrew Bailey has warned that the artificial intelligence boom could trigger financial market shocks that the UK needs to be prepared for.
Speaking to the BBC about the impact of AI on the UK economy, Bailey said the technology has great potential for economic growth, but brings substantial risks that the country needs to be on top of.
As billions of dollars flow into the burgeoning industry and some of the largest AI firms like OpenAI and Anthropic consider initial public offerings at over a trillion-dollar valuation, some have warned of a potential AI bubble. "You could see some correction of asset prices at some point," Bailey said.
The central bank is watching the money invested in and loaned to AI firms over the past few years "very carefully," Bailey said. "Everybody is currently priced to be a winner," he added, but warned that when "you look back at the past, not everybody is a winner," drawing a parallel between early internet search leader Netscape and the eventually dominant Google.
"We are prepared for the fact that there will be, I think, some shocks coming to markets, and we have to deal with that," he said. "We have to make sure the system is resilient."
Bailey also noted other AI risks, including cyber attacks and the rise of deepfakes. "In the wrong hands... it's a very powerful, potentially very powerful, weapon," he said.
However, the BOE governor also highlighted a big potential benefit from AI in its ability to "speed up the work that supports the Monetary Policy Committee," which sets interest rates in the UK. "It's not taking a decision, but it's a tool in the hands of the policy maker, and that's good," he said.
Regulating AI 'not the right place to start'
In an earlier post on Wednesday, the central bank governor said regulating AI "is not the right place to start," adding that "understanding, testing, and establishing credible points of intervention must come first."
Bailey said AI development should not be halted or prohibited as the "benefits are immense," but added that there must be a system for intervention and establishing boundaries for AI.
His comments come amid calls from bosses of leading U.S. AI firms to slow down the pace of frontier AI development around safety, security, and alignment concerns. President Trump has rejected the idea of a slowdown, recently referring to the risks as a "hoax."
However, following a meeting with OpenAI, Anthropic, Nvidia, SpaceX, Meta, and Google executives at the White House on Tuesday, Trump said they had signed a "morally [not legally] binding" document to serve as a "form of protection" from AI's potential risks.