Gokhan Ergocun
08 October 2026•Update: 08 October 2026
Bank of England Governor Andrew Bailey said the global financial system remains resilient but warned that lower growth, repeated supply shocks and evolving market structures pose new long-term challenges.
The global financial system successfully withstood recent periods of uncertainty without major breakdowns in liquidity or trading conditions, Bank of England Governor Andrew Bailey said on Thursday at the Istanbul Economic Forum.
The two-day forum was organized by the Central Bank of the Republic of Türkiye to address global economic policy challenges by gathering central bank governors and high-level policymakers from around the world, including the US and the UK.
Bailey noted that the world economy currently faces major uncertainties stemming from conflicts in the Middle East alongside vulnerabilities in sovereign debt markets and asset valuations.
He warned that the rapid expansion of artificial intelligence financing created new exposures, even though AI also presented potential growth dividends.
The governor emphasized that weaker potential growth and frequent negative supply shocks, such as the Covid pandemic and Russia's invasion of Ukraine, disrupted economic supply capacities.
He pointed out that negative supply shocks pushed inflation and output in opposite directions, which created significant difficulties for monetary policy.
Central banks must make forward-looking judgments and update them as evidence changes to prevent temporary shocks from becoming persistent inflation, Bailey added.
He stated that strong banks and solid corporate balance sheets give policymakers the necessary room to respond to crises without triggering financial collapses.
Bailey highlighted that lower growth and repeated supply shocks weakened public finances and increased pressure on governments to provide support.
He observed that global government bond markets changed profoundly as leveraged investors now play a much larger role than traditional long-term investors.
This new market structure increased the capacity to absorb government debt but also brought greater fragility since deleveraging in one market can spread quickly to others, he explained.
Bailey called for policies that pursue sustainable growth and maintain credible monetary and fiscal frameworks.
He stressed that artificial intelligence and robotics can drive scientific discovery and raise prosperity if authorities deploy them safely.
The governor concluded that financial markets must improve their core resilience to absorb future shocks without amplifying them.
