Bank of England governor Andrew Bailey has said that regulators should embrace AI to help them identify risks in the financial services sector before they escalate.
According to Reuters, speaking at an event hosted by the London School of Economics, Bailey explained that AI could be critical in spotting the “smoking gun” hidden in the huge volumes of data collected by central banks and supervisory bodies. He warned that regulators often hold vital information but lack the tools to interpret it effectively.
“I think we’ve all got to invest heavily in data and data science, and techniques,” Bailey said. He acknowledged that while authorities gather enormous amounts of information, “none of us, I think, can put our hand on our heart to say that we’re sort of optimally using it all.”
Bailey stressed that the inability to properly analyse this data could leave regulators exposed. “It also creates the danger for the authorities that you’ve got the evidence in the building and you haven’t been able to use it and it subsequently comes out that somewhere in your system was the smoking gun,” he said. “That’s a recurring concern for all of us.”
His comments come at a time when AI adoption is accelerating across the financial services sector, with both private firms and regulators exploring how advanced analytics can improve oversight, efficiency, and resilience.
Bailey also used his remarks to caution against loosening regulations in ways that might endanger financial stability. He repeated his concerns over political pressure to reduce oversight of banks and financial institutions, arguing that this could reopen the door to risky practices.
He noted his earlier disagreement with Finance Minister Rachel Reeves’ characterisation of regulation as a “boot on the neck of businesses.” Defending the Bank of England’s role, Bailey emphasised that robust regulation remains essential to safeguard the broader economy.
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