Bank of England Warns Frontier AI Is Raising Cyber Risk Across the Financial System

The Bank of England has warned that rapid progress in the most capable general purpose artificial intelligence models is raising the threat level facing the UK financial system. In its July 2026 Financial Stability Report, the Financial Policy Committee said advances since its December 2025 assessment are consistent with its earlier judgment that AI-related risks are likely to increase, and could materially heighten vulnerabilities through cyber and operational channels in particular. The committee has assessed AI risks across four routes: greater use in the core financial decision-making of banks and insurers, greater use in financial markets, operational risks connected to AI service providers, and a shifting external cyber threat environment. It said the developments reinforce the importance of firms acting on a joint statement issued in May 2026 by the Bank, the Financial Conduct Authority and HM Treasury on frontier models, and of strengthening existing cyber and operational resilience frameworks. Authorities are supporting firms through supervision and sector engagement, and an upcoming consultation from the Bank and the Prudential Regulation Authority will address cyber and information and communication technology risk management, alongside work to operationalise the UK's Critical Third Party regime.