BOE's Andrew Bailey Talks AI Risks, Private Credit and Crypto

Summary

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Bloomberg Talks: BOE’s Andrew Bailey Talks AI Risks, Private Credit and Crypto

Date: May 29, 2026

Guest: Andrew Bailey, Governor of the Bank of England
Host: Bloomberg Interviewer

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Episode Overview

This episode features an in-depth conversation with Andrew Bailey, Governor of the Bank of England, covering critical and timely issues impacting global finance. The discussion encompasses the risks and opportunities presented by AI in the banking sector, global coordination on private credit, and evolving approaches to stablecoins, digital currencies, and financial stability. Bailey shares his insights on the ever-changing technological landscape, the push for greater international collaboration, and how the BOE is adapting its policies and internal practices to meet future challenges.

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Key Discussion Points & Insights

1. AI in Banking: Risk, Access, and International Coordination

• Delayed Access to Mythos Model

  • UK banks still do not have access to the much-anticipated AI security model, Mythos. Bailey attributes the delay to ongoing processes with US authorities, despite public predictions for quicker access from Anthropic, the company behind Mythos.

    "So they don't have access to Mythos at the moment… there's obviously something of a race going along to move the technology on." — Andrew Bailey [00:55]

  • Bailey emphasizes the need for a “controlled but fast process to assess these models,” as quick security patching is essential after integrating new AI tools.

    "What my head of IT at the Bank of England told me is a ton of patching that then has to follow very quickly to fix the things that these models are finding." — Andrew Bailey [02:38]

• Open Source AI: Opportunity or Vulnerability?

  • Bailey expresses concern about the risks of open source AI, particularly in security, echoing Anthropic's caution.

    "Open source is more of a vulnerability than closed and that's certainly a conclusion they've drawn from all the work they've done." — Andrew Bailey [03:29]

  • Despite not being an AI expert by his own admission, he notes that UK banks with robust cyber defenses are better positioned for the AI transition.

• Global AI Risk Requires Global Responses

  • Bailey underscores that cybersecurity spillovers are too great for a purely national approach, advocating for robust international cooperation.

    "We can't just have a single sort of national approach towards dealing with the consequences and mitigating it. There's got to be an international approach to this." — Andrew Bailey [05:04]

2. Private Credit: Integration and Systemic Risks

• The Double-Edged Sword of Private Credit

  • While private credit serves a valuable role, especially supporting tech innovation and AI investment, Bailey warns the “private” label is misleading because of its deep entanglement with the traditional banking system.

    "It is not an island on its own. It is connected into the system, into the broader system... That's not bad, that's inevitable." — Andrew Bailey [06:25]

  • He highlights risks, particularly as private credit spreads into retail investment, questioning whether all investors fully understand their exposures.

    "We are seeing some increase in requests, quite a big increase in requests for outflows to take liquidity out. And I think how that plays out will depend on what investors think they thought they had relative to what they now think they've got." — Andrew Bailey [07:28]

• Bank of England’s Approach:

  • The BOE is conducting further system-wide exploratory scenarios — stress-testing potential systemic weaknesses.

    "That's why at the Bank of England we're doing a second system-wide exploratory scenario to follow on the one we did on hedge fund activity and major government bond markets..." — Andrew Bailey [06:53]

3. Crypto, Stablecoins, and Digital Currency Policy

• Stablecoin Regulation: Limits and Global Rules

  • The UK will soon propose updated approaches on stablecoin issuance limits, possibly moving from user caps to total issuance caps.

    "We'll be coming up with proposals shortly before the summer." — Andrew Bailey [08:10]

  • Bailey stresses the need for cross-border “rules of the game,” advocating a neutral approach to different forms of digital money (CBDC, tokenized deposits, stablecoins).

    "We're going to have to have... rules of the game, as it were, for the use of stablecoins cross border." — Andrew Bailey [08:24]

• Divergence with U.S. Policy

  • The interviewer notes the U.S. appears more permissive, seeing its dominance in this sector as a competitive advantage, while Bailey believes “the rest of the world is going to take a different view.”

    "I think the rest of the world is going to take a different view on that..." — Andrew Bailey [09:34]

• On a Digital Pound (CBDC):

  • Bailey is cautious but sees value in ongoing research and pilots, with a preference for improvements such as tokenized deposits over launching a retail CBDC outright.

    "For me, the question is this: do we need to create a new form of central bank money to satisfy this need to have digital technology in the payment system?" — Andrew Bailey [10:01]

  • He references UK leadership in payments and participation in cross-border projects (e.g., Project Agora with the BIS) as venues for ongoing innovation.

4. AI Tools at the Bank of England

• Current Uses and Experimentation
  • The BOE employs AI for data analysis, coding, modeling, and even to shape the language of policy documents—testing how minutes might be read by the public and markets.

    "We use it for data... we do start to use it to use things like language models to say well if you write the MPC minutes like this, how might it be received?" — Andrew Bailey [11:29]

  • Memorable exchange on “England Speak” (AI-generated central bank-speak) and the interviewer’s playful competition with their own AI model.

    “We have England Speak.” — Andrew Bailey [12:01]

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Notable Quotes & Memorable Moments

• On AI Risk Management:

  "I think if you have kept your cyber defenses up and better prepared, you will go into this process in a better place." — Andrew Bailey [03:23]

• On Open Source and Doctrine:

  "There's a lot of almost theological doctrine about open source and not open source, which this is somewhat pushing against." — Andrew Bailey [03:53]

• On Cross-Border Payment Systems:

  "Cross border payments... I'm always described that's sort of the land that time forgot." — Andrew Bailey [11:05]

• On Central Banks Using AI:

  "This is not about voting or anything. This is about words. This is how it will be received." — Andrew Bailey [12:12]

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Important Timestamps

• 00:25 — Start of AI/cybersecurity discussion
• 00:55–02:53 — Mythos model access, AI risks, and the US/British regulatory divide
• 03:17–05:30 — Open source AI, international approach to cybersecurity
• 05:30–07:44 — Private credit systemic risks and BOE stress testing
• 07:44–11:08 — Stablecoin regulation and digital currency policy
• 11:08–12:31 — AI tool adoption at the Bank of England; language models and policy communication

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Summary Takeaways

Andrew Bailey’s remarks reflect the Bank of England’s twin priorities: guarding the stability of the financial system amid rapid technological advancement and advocating for cross-border collaboration in the face of global challenges. The episode underscores a cautious optimism about AI and digital innovation, paired with clear-eyed assessments of new risks and the need for coordinated regulation. Bailey’s practical, sometimes skeptical tone provides listeners with both reassurance and insight into how a leading central bank navigates the fast-changing landscapes of technology and finance.

Transcript

[Indiana University Announcer]

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[Andrew Bailey]

Bloomberg Audio Studios, Podcasts, Radio News and thank you

[Bloomberg Interviewer]

Governor for joining us at this conference. We did have an opportunity to hear from you and talked to you about monetary policy this morning, but there's also been a lot of conversation about AI and the potential impact on the economy of AI, but also the cybersecurity risks associated with new AI tools. And of course, most recently, the one we've been hearing about worrying about is Mythos. Can I just confirm, have UK banks got access to Mythos now? Are they getting it on that trial basis?

[Andrew Bailey]

So they don't have access to Mythos at the moment. And also that's an issue that is very important and by the way, this is a very important development. But there are other models out there. I mean MIFOS isn't the only model out there. There's obviously something of a race going along to move the technology on. And you know, I'm very optimistic that they are either they either just have or about to get the major UK banks have access to other models which will get them substantially.

[Bloomberg Interviewer]

But just getting back to the Mythos because we had a story, in fact, I think the Anthropics UK and Northern Europe's head, the company that obviously makes Mythos, they told Bloomberg last month that it would be within a week that UK bank chiefs to be able to be part of that, the glass wing project. So do you know what happened?

[Andrew Bailey]

Well, there was a. Yes, so there has been a Glasswing phase two being talked about really for the last six weeks or so, but it hasn't happened yet. And I think this has been somewhat caught up in the process with the US administration.

[Bloomberg Interviewer]

So sorry, just reading between the lines, it sounds like Anthropic had certainly told us on Bloomberg television that it was going to be just a matter of days or a week or so and it's the US administration that has potentially.

[Andrew Bailey]

Well, we're not party to that process. I think to be fair to Anthropic, I think they, you know, they have been working very hard. They want, you know, access to critical parties and it's very important. They're still, you know, I think actively seeking that. Quite why the process is a bit different from one company to another. I'm afraid I can't explain to you obviously from our point of view, given you Know our concern about the risks involved in this, it's very important that there is access. And what I really want to see is evolve a process very quickly where we can have a sort of controlled but fast process to assess these models. And frankly, what my head of IT at the bank of England told me is a ton of patching that then has to follow very quickly to fix the things that these models are finding.

[Bloomberg Interviewer]

And I guess as part of this conversation, I guess we also think about the conversations I have when I get nervous is when they also talk about the open source. The companies that are a bit behind the way they get users is to have open source, which means if you discover that the so called bad guys are using that technology to rob banks or whatever it is, you're then not able to turn it off in the way you can with the others.

[Andrew Bailey]

Well, look, I'm not speaking as an expert on this subject.

[Bloomberg Interviewer]

You have to be an expert.

[Andrew Bailey]

Well, yeah, we try to learn quickly. I think two things that I've taken from the many discussions we've had. One is that I think if you have kept your cyber defenses up and better prepared, you will go into this process in a better place than if you haven't. And we've worked very hard with UK banks over many years and we'll go on doing so. Secondly, I think you're right on the open source point. Now I think what anthropic are certainly saying is, look, open source is more of a vulnerability than closed and that's certainly a conclusion they've drawn from all the work they've done now. I mean, the two things I think, however, one is there's a lot of open source out there. Two, again, I'm not an expert in this field, there's a lot of almost theological doctrine about open source and not open source, which this is somewhat pushing against.

[Bloomberg Interviewer]

Yeah, I think because we've tended to say there's been a sort of inclination towards open source, but in this case it feels like it's more.

[Andrew Bailey]

It's been questioned. Yeah, yeah.

[Bloomberg Interviewer]

I mean, does it highlight sort of overall the risks of, I mean, going back to the anthropic thing of having US owned companies being absolutely dominant in this space and actually UK banks, you being in the position of kind of going begging to the Americans to get access to this?

[Andrew Bailey]

Well, I don't take a particular position on where the sort of, in a sense the companies are based that are developing these things because this is a very, very big development and it's actually very important. And there are many good things that will come out of this. What I would say is that the spillovers from this sort of some CY risk are so big that we can't just have a single sort of national approach towards dealing with the consequences and mitigating it. There's got to be an international approach to this. It's got to be in a sensible sort of firmly based international process. Because I think anybody who thought, well, I've dealt with my banks, that's okay, I'm afraid that won't work because they're all so heavily interconnected. We've got big payment systems, big messaging systems, so that approach won't work.

[Bloomberg Interviewer]

Now, as chairman of the Financial Stability Board, you're obviously involved in lots of discussions around sort of global efforts on financial stability and looking for risks. And one area, again where people are looking nervously at the US in particular is the run up of private credit and whether there should be a more of a tougher approach to at least having more reporting requirements or other things. On private credit. You've highlighted that a lot of traditional banks and institutions are now very much intertwined. Private credit is that, I mean, are you getting a hearing on that from the US in terms of the risks of that?

[Andrew Bailey]

Excuse me. Yes, I think first of all, private credit is playing an important role. I think it's a good thing. Let's come back to AI for a moment. We've got a very big investment demand going on for it to support the innovation in AI and in the tech sector more broadly. And private, private credit is an important part of meeting that demand and that's a good thing. What I think, you know, I think we have to look very carefully at is the word private can be misleading in some ways because it is not an island on its own. It is connected into the system, into the broader system. A lot of the underpinning liquidity will come from the banking system. It is connected into the banking system. That's not bad, that's inevitable. So it's very important that we understand those interconnections, how they work. Are there points of sort of fragility in there? That's why at the bank of England we're doing a second system wide exploratory scenario to follow on the one we did on hedge fund activity and major government bond markets a couple of years ago. So that's the first thing. The second thing I think is important is, and I think this is particularly true with the spread into sort of so called retail investment is do the investors understand the assets they've got and the characteristics of those assets. Because there are clearly there are some signs of strains in the market. I think they're often described as idiosyncratic. Okay. Every incident will have a different story attached to it. But we are seeing some increase in requests, quite a big increase in requests for outflows to take liquidity out. And I think how that plays out will depend on what investors think they thought they had relative to what they now think they've got.

[Bloomberg Interviewer]

Just to run through another area where you've got quite a big distinction now between the UK and the US or at least there has been in the proposals you had put forward was for state stablecoins and the basic approach you'd had towards them. Are you now scrapping the idea of capping the amount of stablecoin that individuals and businesses can.

[Andrew Bailey]

Well, we've looked together at that for the UK and we'll be coming up with proposals shortly before the summer.

[Bloomberg Interviewer]

So still because it was supposed to be in June.

[Andrew Bailey]

Yeah. I'm expecting well before the sort of summer holiday season takes off for us, we'll get that out.

[Bloomberg Interviewer]

Are you looking at the sort of looking at total issuance sort of limits instead of.

[Andrew Bailey]

That would certainly be an option. Let's see where we get to. I think the other thing that I would emphasize with stablecoins is to put the global hat back on again is that we are going to have to have sort of what I call sort of rules of the game, as it were, for the use of stablecoins cross border. And we are going to be approaching the point when we really do need to sort of get seriously to work on that side of things, because that's going to be important. Because again, I always say what we want to get the benefit of is digital technology and all the benefits that will bring with it in the payment system. Now you can do that in all sorts of ways. You can do it through central bank digital currency, you can do it for tokenized deposits, do it for stablecoins. I don't think we should be in any sense sort of biased in our approach to that. But there are going to have to be sort of rules of the road, as it were.

[Bloomberg Interviewer]

But you've been saying something similar to that in various ways for a while.

[Andrew Bailey]

Yes.

[Bloomberg Interviewer]

And it doesn't seem like there's any appetite on the other side of the Atlantic to have rules of the road or really very many limits on this part of the market at all. They see it as a big competitive advantage for the U.S. yes.

[Andrew Bailey]

I mean But I think, look, I think the rest of the world is going to take a different view on

[Bloomberg Interviewer]

that and on the digital currency, the central bank digital currency again the US has now gone out of its way to ban in the Genius act to ban the US from the Federal Reserve from having producing a digital dollar.

[Andrew Bailey]

A retail. Yes.

[Bloomberg Interviewer]

Will there ever be a Bank of England will be a digital pound?

[Andrew Bailey]

Well I say look, we continue to work on it and it's very important we do because it helps us to understand the sort of the underlying technology. For me, I know I'm probably at the sort of noted skeptical end on this distribution is I think for me the question is this, do we need to create a new form of central bank money to satisfy this need to have digital technology in the payment system? And this is a point we've discussed with the UK banks. Banks said look, most of the stock of money is in your accounts. If you think about commercial bank money, they've got most of the money. There's a stock of it in the central bank. So I would say the natural starting point here is to explore the tokenized deposits. That is what is going on both domestically and internationally. UK banks are looking at it because we got ahead in the UK 20 years ago with faster payments. Technology's moved on, we've got to move on. And then internationally you may have seen the other day there was news of a test of the so called Project Agora which the BIS are running, which we're involved in, which I think is a very good thing because that gets to the other big issue which is how can we improve cross border payments? Because I'm always described that's sort of the land that time forgot.

[Bloomberg Interviewer]

I have to, I'm pushing you because I want this one last question. We've had some, quite a lot of the central bankers here have been sort of somewhat bragging about the number of AI tools they have on their own computers and how they're using it. We're obviously using AI. Our Economist team is using AI on what the bank of England says and we're judging whether or not it's direction of travel. How are you using it?

[Andrew Bailey]

We do. So we're, we're growing in our use of it. We, we use it obviously for data and data we use it for, for coding, speeding things up. But we do use it in the mpc. We've, we've experimented with the staff have, with modeling and also you know it's, we do start to use it to use things like language models to say well if you write the MPC minutes like this, how might it be received?

[Bloomberg Interviewer]

So this is terrible. So we're now going to have a, we're going to have a sort of spiral because we are using it.

[Andrew Bailey]

We have England Speak.

[Bloomberg Interviewer]

We have developed our own economists. Right. So we've done ours, you've done yours. The whole thing is going to play

[Andrew Bailey]

against your model and. Well, that's the way of the world. That's the way the world. But I mean, it's helpful to us because it does occasionally throw things up and it says, look, if you do this, I mean, this is words. This is not about voting or anything. This is about words. This is how it will be received.

[Bloomberg Interviewer]

Yeah. Governor Bailey, really good talking. Stephanie, thank you very much.

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