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BOE Governor Bailey Warns of Global Market Volatility Driven by AI and Leverage
Finance · Financial Conglomerates · yonhap_finance · 2026-08-31
Bank of England Governor Andrew Bailey has warned that stretched AI valuations and rising leverage could trigger disorderly adjustments in global markets.
What Happened
Global Market Warning: Bank of England Governor Andrew Bailey has warned that the global financial system remains vulnerable to disorderly adjustments due to the AI boom and increased use of leverage. In a letter to G20 finance ministers, he highlighted that these risks could easily cross national borders and destabilize international markets.
AI and Cyber Risks: Bailey pointed out that frontier AI is significantly complicating the financial risk landscape, particularly regarding cyber security. He emphasized that the lack of global protocols for managing AI models increases the potential for systemic shocks that could undermine market confidence.
Leverage Concerns: The governor expressed concern over the rising use of leverage, including leveraged ETFs and trend-following strategies among retail and institutional investors. He noted that such practices tend to amplify market downturns when investor sentiment shifts, as seen in recent weeks.
Market Concentration: Beyond simple borrowing, Bailey highlighted the risks associated with high asset valuations and the growing web of cross-investments between AI firms and hyperscalers. He warned that these interconnected vulnerabilities could trigger a cascade of negative impacts if a significant shock hits the financial system.