Bank of England governor Andrew Bailey has said AI could play a vital role in helping regulators detect hidden risks within the financial services sector.
According to Reuters, speaking at an event hosted by the London School of Economics, Bailey emphasised that supervisors such as central banks are sitting on vast amounts of data but often lack the tools to analyse it effectively. He suggested AI could be critical in identifying early warning signs and ensuring authorities make better use of the information they already hold.
“I think we’ve all got to invest heavily in data and data science, and techniques,” Bailey said. He added that while regulators collect huge volumes 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 highlighted a recurring concern among watchdogs — that evidence of wrongdoing or risk may be buried within regulatory systems but overlooked. “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.”
The governor also used the platform to caution against efforts to weaken financial regulation. While he acknowledged the debate around the role of rules in business, Bailey reiterated that strong oversight is necessary to prevent a return to excessive risk-taking that could destabilise the wider economy.
His remarks followed comments made in July, when he disagreed with UK finance minister Rachel Reeves’ description of regulation as a “boot on the neck of businesses.” Bailey argued that regulatory frameworks, particularly those governing banking, remain vital safeguards against financial crises.
The speech underscores the growing interest among regulators in deploying AI to enhance supervision, reduce systemic risk, and ensure accountability within financial markets.
Keep up with all the latest RegTech news here
Copyright © 2025 RegTech Analyst
Copyright © 2018 RegTech Analyst
