On 31 August 2026, the Financial Stability Board (FSB) published a letter from its Chair to G20 Finance Ministers and Central Bank Governors ahead of their ahead of their meetings on 31 August and 1 September 2026.

In his letter FSB Chair, Andrew Bailey, refers to a combination of macroeconomic vulnerabilities, growing leverage in financial markets and the risks posed by frontier artificial intelligence (AI) models, in particular:

  • Global economic and financial conditions: The letter notes that the global financial system has remained resilient despite the substantial economic shock arising from conflict. However, Bailey warns that the environment remains challenging as energy-driven inflationary pressures persist, financing costs have increased, and volatility has returned across several asset classes.Against this backdrop, the FSB identifies several vulnerabilities. These include fragilities in sovereign debt markets associated with high issuance volumes, shortened maturities and increased leverage among some market participants. The letter also highlights concerns in private credit markets, particularly regarding interconnectedness with the wider financial system, liquidity mismatches and limited transparency. Elevated valuations in some asset classes, especially AI-related investments, are cited as a further source of concern.
  • Rising leverage and market concentration: Bailey expresses concern about the growing use of leverage in equity markets. He points to increased use of leveraged exchange-traded funds (ETFs), momentum-driven investment strategies and greater participation by leveraged investors, including hedge funds. The letter argues that leverage is interacting with concentrated market structures and high valuations in ways that could amplify future corrections. Particular attention is paid to increasing cross-investment links between AI companies and major cloud service providers, which could transmit shocks across markets and jurisdictions. Bailey therefore warns that a large shock, or a combination of shocks, could trigger several vulnerabilities simultaneously.
  • Frontier AI as an emerging financial stability risk: A central theme of the letter is the emergence of frontier AI models. Bailey describes these systems as demonstrating increasingly sophisticated autonomy, problem-solving capabilities and potentially significant threat capabilities. From a financial stability perspective, he identifies cyber risk as the most immediate concern. The FSB warns that frontier AI could fundamentally alter the speed, scale and economics of cyberattacks. Such developments could undermine confidence in financial markets and critical financial infrastructure on a system-wide basis. The letter therefore emphasises the need for both firms and authorities to strengthen resilience and preparedness. For financial institutions, priorities include stronger vulnerability management, enhanced incident response and recovery capabilities, and the ability to rebuild critical systems and data from “bare metal” following a significant cyber incident. Bailey also stresses the importance of resilience among critical third-party technology providers given the concentration of technology services supporting the financial sector.