Bank of England says the risk of a financial-system shock has risen, pointing to AI debt and high AI valuations

The Bank of England's Financial Policy Committee published the record of its 25 September meeting on 30 September. It said: “The likelihood that interconnected vulnerabilities in the financial system crystallise has risen”. It named two drivers: renewed US–Iran conflict pushing up energy prices and government bond yields, and the fast growth of AI-related borrowing.

The record cites a Morgan Stanley estimate that, as of early September, “global AI-related debt issuance totalled around $450 billion, more than double the total issuance in all of 2025”. AI-company borrowing in the UK is smaller than in the US and the euro area, but AI hyperscalers have accounted for 47% of sterling corporate bond issuance so far this year, the committee said.

On share prices, the record says: “Equity valuations for AI companies fell sharply in July.” Valuations in AI-linked markets remain high and rest on strong expectations of future earnings, it adds. If expectations of AI-driven productivity gains are reassessed, the effect “could therefore affect not only AI-related asset valuations but also sovereign debt markets.”

The committee kept the UK countercyclical capital buffer at its neutral rate of 2%. Reuters reported the record the same day. The warning joins a run of official cautions on AI-driven market risk; the IMF's financial-stability warnings ran in the Switchboard on 8 and 17 October.

• Confirmed The FPC says the likelihood that interconnected vulnerabilities in the financial system crystallise has risen. Bank of England
• Confirmed The FPC cites Morgan Stanley's estimate of about $450bn of global AI-related debt issuance as of early September, more than double all of 2025. Bank of England
• Confirmed AI hyperscalers accounted for 47% of sterling corporate bond issuance so far this year. Bank of England
• Confirmed The UK countercyclical capital buffer was held at 2%. Bank of England