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Bank of England’s Bailey: AI can help regulators uncover the ‘smoking gun’

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Bank of England Governor Andrew Bailey said financial regulators should adopt artificial intelligence to better detect misconduct and risks within firms they oversee. Speaking at the London School of Economics on Monday, Bailey stressed the need to invest heavily in data, data science, and AI techniques to make full use of the vast information regulators already collect.

Bailey warned that supervisors face a recurring problem: crucial evidence of wrongdoing may exist within their own datasets but remain undetected until it is too late. “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.

The BoE governor reiterated his opposition to rolling back financial rules in the name of business competitiveness. He said easing oversight could risk a return to the kind of behavior that destabilized the economy during the 2008 financial crisis.

His comments come amid ongoing debate over how much regulation is appropriate for the UK’s financial sector. In July, Bailey pushed back against Finance Minister Rachel Reeves’ claim that regulation was a “boot on the neck of businesses,” defending the BoE’s prudential framework for banks and other institutions.

The BoE is now exploring how AI might strengthen its supervisory role, potentially helping regulators spot early-warning signs of fraud, mismanagement, or systemic vulnerabilities hidden in mountains of financial data.

Bank of England Pushes Decision on Digital Pound to 2025 or Later

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The Bank of England (BoE) announced on Tuesday that no decision will be made for at least two years regarding the introduction of a central bank digital currency (CBDC) for the British public. This effectively delays the timeline for the so-called “digital pound,” a project initially championed by former Prime Minister Rishi Sunak during his tenure as finance minister in 2021.

While the idea of a digital pound gained early momentum, public consultations revealed widespread concerns about privacy, leading to a more cautious approach by the BoE and the current government. In October, BoE Governor Andrew Bailey expressed skepticism about the necessity of a digital currency, stating that it was “not my preferred option.” However, he acknowledged that it might become essential if traditional banks fail to provide competitive payment systems compared to less regulated tech companies.

The BoE confirmed it is collaborating with Britain’s finance ministry on exploring a potential design for the digital currency. This work aligns with earlier consultation plans and will take into account broader developments in the payments landscape.

“After completing the design phase over the next couple of years, the Bank and government will evaluate the policy case for a digital pound and decide whether to proceed,” the BoE stated. A decision is not expected before 2025.

The government has stressed that a digital pound would prioritize privacy but would not offer full anonymity, unlike physical cash. Similar to bank accounts and credit card payments, authorities would retain the ability to monitor transactions in cases of suspected money laundering or terrorism financing.

The BoE emphasized that legislation would ensure user privacy protections. “Neither the Bank nor the government could access users’ personal information or control how households and businesses use their money,” the central bank assured.