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The head of the UK’s banking watchdog has warned there is “a lot to worry about” in the finance sector, including the risk of an “AI bubble” and concerns over US credit markets.
Sam Woods also told City Owners and top bankers said a possible correction related to government bonds from the US Secretary treasure Would be “highly risky”.
He spoke before city luminaries at the annual function Haveli House Dinner on Wednesday evening.
The chief executive of the Prudential Regulation Authority (PRA) and deputy governor of the Bank of England said the UK banking system has successfully weathered “severe blizzards and storms” in recent years.
However, he said a number of significant risks mean the world remains a “dangerous place”.
Mr Woods said: “The geopolitical landscape is bleak. Cyber attacks are becoming more frequent.
“New technologies, if not well moderated and controlled, have the potential to cause significant disruption.
“And within the financial services sector, there is much to worry about – including opaque and complex private lending by non-banks, recent cracks emerging in US credit, the risk of an AI bubble and highly concentrated life reinsurance structures.”
In his speech, Mr Woods also cautioned over recent suggestions in the US that highly rated government bonds could be removed from leverage ratio calculations.
Scott BesantThe US Treasury Secretary argued earlier this year that it could be used to lower Treasury yields and improve market resilience.
However, the PRA boss said he believed the idea “carries real risks” to the financial system.
Mr Woods said: “I think this would be a profound – and extremely risky – change.
“In my view such a change would be the equivalent of ripping off our jackets, warm hats and gloves and throwing them over the nearest cliff.”