AI Could Accelerate the Next Financial Crisis, Bank of England Warns

AI could accelerate the next financial crisis by spreading market shocks more quickly through the banking system, the Bank of England has warned. The central bank said the rapid adoption of artificial intelligence across banking is creating new cyber and operational risks capable of amplifying future turmoil.

In its latest Financial Stability Report, the Bank said AI is becoming deeply embedded across financial services, improving everything from fraud detection to customer support.

But it warned the same technology is also increasing reliance on shared AI platforms, cloud providers and digital infrastructure, raising the possibility that a cyber attack or operational failure at one institution could ripple more quickly through the wider financial system.

The warning comes as financial institutions rapidly integrate generative AI into fraud detection, customer support, compliance, software development and trading operations.

The Bank said the technology promises significant productivity gains, but warned its growing use across core financial infrastructure means cyber incidents, operational failures and outages could have wider consequences than they would have in a less connected system.

AI Creates New Risks Alongside New Opportunities

The Bank said AI is changing both the speed and sophistication of cyber threats.

Generative AI can help attackers produce more convincing phishing campaigns, identify software vulnerabilities more quickly and automate malicious activity on a much larger scale than previously possible.

At the same time, financial institutions are deploying AI across critical business functions, from compliance and fraud detection to software development and customer support.

The report warned that those trends could allow operational disruptions to spread more rapidly than in previous crises, particularly where several institutions rely on the same underlying technologies.

Growing Dependence on AI Providers Raises New Risks

The Financial Policy Committee also highlighted the financial sector's increasing dependence on a relatively small number of cloud computing providers and AI developers.

As more banks adopt the same infrastructure and foundation models, a cyber attack, technical outage or operational failure affecting one provider could disrupt multiple financial institutions simultaneously.

The Bank said firms should understand those dependencies, strengthen contingency planning and ensure critical services can continue if third-party AI systems become unavailable.

It added that operational resilience should remain a priority even as firms accelerate AI adoption.

The Technology Also Brings Significant Benefits

Despite the warning, the report stressed that AI offers substantial opportunities for the financial sector.

Banks are already using the technology to improve productivity, strengthen fraud detection, analyse large volumes of data and automate routine processes. Those gains could improve efficiency across the industry and support economic growth over time.

But the Bank said firms should not allow rapid deployment to outpace governance, oversight and risk management.

Human supervision, regular resilience testing and clear accountability remain essential as AI becomes more deeply integrated into core financial services.

Regulators Want to Stay Ahead of the Risk

The Bank said financial regulators are working with firms to better understand how AI is being deployed across the sector and where new vulnerabilities may emerge.

The report noted that resilience will become increasingly important as financial institutions expand their use of AI in payments, lending, trading and other critical services.

The Bank's warning is not that artificial intelligence will trigger the next financial crisis. Instead, it argues that if a major cyber incident or operational failure occurs, AI could increase the speed at which disruption spreads through an increasingly connected financial system.