Bank of England warns AI risks financial stability

The Bank of England says AI is becoming a growing threat to financial stability. Investors are betting big on AI, while banks face more cyber risks from the tech. In its latest report, the central bank warns that leveraged bets by hedge funds and heavy borrowing by AI firms could trigger market swings if sentiment shifts. It also notes that AI's potential for harm is growing fast. Despite the risks, the Bank says the UK banking system remains resilient. It has proposed allowing banks to reduce capital after a crisis to keep credit flowing. Deputy Governor Sarah Breeden has already called for new AI-specific rules to manage risks from autonomous systems.