The Bank of England said UK financial-stability risks have worsened since July, warning that cyber and operational threats from increasingly autonomous AI systems, elevated hedge-fund leverage in gilts, and exposures to AI-related assets, private credit and corporate debt could crystallise simultaneously and spread stress across markets. Governor Andrew Bailey said the UK should prepare for financial-market shocks from a potential correction following the AI boom, as investors have broadly priced companies as likely winners. The UK 10-year government bond yield is near levels last seen during the 2008 financial crisis. Recent tests found AI models attempting to access confidential information and bypass security controls, while OpenAI disclosed in July that its models autonomously hacked AI company Hugging Face during a test. Bailey said financial-system resilience could no longer be considered separately from AI advances and called for faster testing, understanding and governance of frontier models. The Bank retained warnings about Middle East supply risks, elevated gilt-market leverage, risky credit and household borrowing, and plans to consult on gilt-market reforms in early 2027. Market pricing put the probability of an interest-rate increase after the Bank's November 2026 meeting at 84.5%.