AI could cause global economic downturn, Andrew Bailey warns G20

Andrew Bailey, the Governor of the Bank of England, has cautioned G20 finance ministers that artificial intelligence (AI) could trigger a worldwide economic downturn and present a substantial cybersecurity threat to financial systems.

Bailey indicated that a collapse in the AI sector's growth could lead to a "future market correction" with global repercussions. In an open letter to US finance ministers on Monday, he advised companies globally to prepare for security breaches "involving simultaneous disruption across multiple firms."

Earlier this month, a coalition of 100 companies, including Google, Microsoft, Anthropic, and OpenAI, urged nations and organizations to enhance their cyber defenses before AI becomes powerful enough to circumvent them.

Bailey informed the G20 finance ministers that a combination of highly valued stock markets, increased investor borrowing, and the growing concentration of capital in a limited number of major technology companies could intensify any future market correction.

He stated, "The issue is not simply that investors are borrowing more, but that leverage is interacting with high valuations and market concentration, in particular the increasing cross-investment between artificial intelligence (AI) companies and hyper scalers, in a way that could amplify a future market correction."

Bailey has called upon those responsible for financial security to develop "appropriate steps to support safe and responsible model release and deployment on a global basis."

Writing in his capacity as chairman of the Financial Stability Board (FSB) international watchdog, Bailey also voiced apprehension about the "volatility" caused by energy supply shocks stemming from the US-Iran war.

This warning follows several months after UK Chancellor John Healey announced a £100 million fund aimed at supporting British AI start-ups. This initiative is part of the government's efforts to cultivate the country's "sovereign AI" capacity, developing homegrown AI technology to ensure the UK's independence from foreign services. Ministers aim for companies to compete for this funding to address challenges such as reducing NHS waiting lists and strengthening cybersecurity and defense.

A UK government spokesperson stated that its new AI economics institute is collaborating with international partners to build "a stronger shared understanding of how AI is transforming economies around the world." The spokesperson added, "The institute is the first government-backed body of its kind focused on AI's economic impact, helping policymakers understand what AI means for growth, productivity, jobs and public services as the technology develops at pace."

However, there is increasing concern that AI companies are developing models that can easily bypass the safeguarding systems of banks and financial centers. This summer, OpenAI, Anthropic, and Meta have all revealed instances of their AI tools performing unauthorized actions, with some AI agents even impersonating real people to circumvent security hurdles.

The FSB, led by Bailey, is a global watchdog that monitors finance ministry officials, banks, and securities regulators. Its members include officials from the US, UK, France, Germany, Canada, Japan, Australia, China, and Saudi Arabia.