The Governor of the Bank of England has cautioned that immediate formal regulation of Artificial Intelligence (AI) is “not the right place to start,” arguing that the technology must first undergo rigorous testing to ensure it does not destabilise the UK’s financial systems.
In comments released on 30 September 2026, Andrew Bailey stated that while the risks of AI are significant, the priority should be on “rigorous model testing” both before and after systems are deployed. Speaking alongside the publication of the Financial Policy Committee (FPC) quarterly record, the Governor suggested that society must retain the capacity to govern these systems as they become increasingly capable.
The Bank of England is currently monitoring what it describes as “interconnected vulnerabilities” within the economy. This includes the rapid growth of the AI sector and the debt associated with its development.
AI debt overtakes UK government borrowing
Data from the FPC record highlights the sheer scale of investment currently flowing into the AI industry. Between January and September 2026, AI-related debt issuance reached $450 billion (approximately £339 billion).
This figure has now surpassed the £333 billion worth of gilts—government bonds—that the UK government had planned to issue over the course of 2026. This level of borrowing has raised questions about the potential impact on the wider financial system should there be a sharp correction in the valuation of AI firms.
The Governor’s stance suggests that a “more formal regulatory framework” may emerge in the future, but that the current focus must remain on the resilience of banks and financial institutions.
Broader economic stability
While AI remains a primary focus for the Bank, the FPC also addressed wider risks to the UK’s economic health. The committee opted to maintain the UK Countercyclical Capital Buffer (CCB) at 2%. This is a rainy-day fund that banks are required to hold to ensure they can continue lending during periods of economic stress.
The September 2026 Financial Policy Committee record also noted that geopolitical tensions, particularly in the Middle East, continue to pose a risk to energy prices and bond yields.
For the banking sector, the Bank’s current priority is ensuring that firms are prepared for AI-driven risks, such as sophisticated cyber-attacks, rather than implementing new top-down legislation that could stifle technological growth. Mr Bailey emphasised that “points of intervention” would be necessary, but only after the industry has established a clear understanding of how these models behave in real-world scenarios.
