Bank of England Says it Is Testing AI Risks to Financial Ssystem - Insurance Journal

So the Bank of England, having presumably read the parliamentary report that accused it of taking a 'wait-and-see' approach to AI risks, has decided the best response is to announce it's... running some simulations. Governor Andrew Bailey, in a masterclass of central banking understatement, told the Treasury Committee that 'scenario analysis' is underway to understand how AI could threaten financial stability, because apparently the sight of Anthropic's Mythos model being deemed too dangerous for release wasn't quite alarming enough to prompt actual policy.

The Bank's Financial Policy Committee, in its latest record of meetings, noted that 'systemic risks could rise rapidly as AI adoption increases,' which is the kind of observation one makes while watching a tsunami approach from a deckchair. They're particularly worried about 'concentration risks'—a lovely euphemism for when everyone uses the same flawed AI model and it all goes wrong at once—and 'operational risks,' which presumably covers everything from algorithmic trading meltdowns to a chatbot accidentally liquidating a pension fund. The fact they need to run simulations to understand this suggests they've been paying about as much attention to the last five years of AI development as they did to Liz Truss's mini-budget.

Governor Bailey made a point of 'disagreeing' with the parliamentary assessment that the Bank was passive, which is the regulatory equivalent of insisting you're not asleep because your eyes are technically open. The announcement comes as the Treasury Committee continues its inquiry into AI and the UK's financial sector, an inquiry that will no doubt produce another report that the Bank will then disagree with while continuing to run simulations. One almost admires the circular efficiency: identify a risk, simulate it, disagree with criticism, repeat. At this rate, the first AI-induced financial crisis will be thoroughly modelled before it vaporises everyone's savings.