Bank of England’s Andrew Bailey Backs AI to Help Regulators Spot Risk

Bank of England Governor Andrew Bailey has urged regulators to embrace artificial intelligence (AI) to better identify risks within the financial sector. Speaking at an event hosted by the London School of Economics, Bailey stressed that regulators must improve how they use the vast amounts of data they collect.

“We all need to invest in data, data science, and new techniques,” Bailey said. He explained that although central banks and watchdogs gather large volumes of information, most are not using it to its full potential.

Avoiding Missed Warnings

Bailey warned of a recurring concern in financial oversight—having the evidence of misconduct or instability but failing to act on it in time. “The danger is that the evidence is in the building, but no one finds it until it’s too late,” he said. In such cases, the missed warning signs can become the so-called “smoking gun.”

He emphasised that better data use through AI could help regulators detect problems earlier, reducing the chance of oversight failures that may harm the wider economy.

No Room for Risky Deregulation

During the discussion, Bailey also addressed ongoing debates about financial regulation. He cautioned against reducing rules in a way that encourages risky behaviour. According to Bailey, any rollback of regulation must not endanger the financial system or broader economic stability.

This was not the first time Bailey defended the current regulatory framework. In July, he openly disagreed with Finance Minister Rachel Reeves, who referred to regulation as a “boot on the neck of businesses.” Bailey reaffirmed the importance of the Bank of England’s oversight in maintaining a stable financial sector.

with inputs from Reuters