Bloomberg Audio Studios, podcasts, radio news and thank you Governor for joining us at this conference. We did have an opportunity to hear from you and talk to you about monetary policy this morning. But there's also been a lot of conversation about AI and the potential impact on the economy of AI, but also the cyber security risks associated with new AI tools, and of course, most recently the
one we've been hearing about worrying about is Mythos. Can I just confirm have UK banks got access to Mythos now? Are they getting it on that trial basis?
So they don't have access to Mythos at the moment, and that's that's an issue that is very important. And by the way, this is a very important development. But there are other models out there. I mean, Mythhos isn't the only model out there. Obviously something of a race going along to move the technology on and you know, I'm very optimistic that they are either they either just have or about to get. The major UK banks have access to other models which will get them substantially.
But just going back to the mythosty because we had a story In fact, I think the Anthropics UK and Northern Europe's head the company that actually makes Mythos. They told Bloomberg last month that it would be within a week that UK bank chiefs were going to be able to be part of the glass Wing project. So do you know what happened?
Well, there was a yes. So there has been a glass Wing Phase two being talked about really for the last six weeks or sober it hasn't happened yet, and I think this has been somewhat caught up in the process with the US administration.
So just reading between the lines, that sounds like Anthropic had certainly told us on Bloomberg Television that it was going to be just a matter of days or a week or so, and it's the US administration that has potentially.
Well, we're not party to that process, I think. To be fair to Anthropic, I think they have been working very hard. They want access to critical parties and it's very important they're still, i think actively seeking that. Quite why the process is a bit different from one company
to another, I'm afraid I can't explain to you. Obviously from our point of view, given our concern about the risks involved, and it's very important that there is access and you know what I really want to see is there is evolver a process very quickly where we can have a sort of controlled but fast process to assess
these models. And frankly is to what my head of IT Tea at the Bank of England told me, is a ton of patching that then has to follow very quickly to fix the things that these models are finding.
And I guess and as part of this conversation, I guess we also think about. One of the conversations I have when I get nervous is when they also talk about the open source that the companies that are a bit behind. The way they get users is to have open source, which means if you discover that the so called bad guys are using that technology to rob banks or whatever it is, you're then not able to turn it off in the way you can with the others.
Well, look, I'm not speaking as an expert in the subject. I honestly have the whole Well, yeah, we try to learn quickly. I think two things that I've taken from the many discussions we've had. One is that I think if you have kept your cyber defenses up and better prepared, you will go into this process in a better place than if you haven't. And we've worked very hard with the UK banks over over many years, and we'll go on doing so. Secondly, I think you're right on the
open source point now. I think one anthropic are certainly saying is look, open source is more of a vulnerability than closed and that's certainly a conclusion that they've drawn from all the work they've done. Now, I mean the two things I think however, one is there's a lot of open source out there too. Again I'm not an expert in this field. There's a lot of almost theological you know, doctrine about open source and not open source, which this is somewhat pushing against.
So yeah, I think because we've tended to say there's been a sort of inclination towards open But in this case it feels like it's question, I mean, does it highlight sort of overall the risks of I mean, going back to the anthropic thing of having US owned companies being absolutely dominant in this space and actually UK banks you being in a position of kind of going begging to the Americans to get access.
Well, I don't take it position on where the sort of in the sense that the companies are based that are developing these things, because this is this is a very very big development, and it's actually very important, and there are many good things that will come out of this. What I would say is that the spillovers from this sort of some cyber risk are so big that we can't just have a single sort of national approach towards dealing with the consequences and mitigating it. There's got to
be an international approach to this. It's got to be a sensible, sort of firmly based on international process. Because I think any body of thought, well, i've dealt with my banks, that's okay. I'm afraid that won't work because they're all so heavily interconnected. We've got big payment systems, big messaging systems, so that approach mon't work. Now.
As chair of the Financial Stability Board, you obviously involved in lots of discussions around sort of global efforts or financial stability and looking for risks. And one area again where people are looking nervously at the US in particular is the run up of private credit and whether there should be more of a sort of a tougher approach to at least having more reporting requirements or other things.
On private credit. You've highlighted that a lot of traditional banks and institutions are now very much intertwined private credit. Is that I mean, are you getting a hearing on that from the US in terms of the risks of that?
Excuse me? Yes, I think first of all, private credit is playing an important role. I think it's a good thing. Let's come back to AI for a moment. We've got a very big investment demand going on for it to support the innovation in AI and in the tech sector more broadly, and private private credit is an important part of meeting that demand, and that's a good thing. What I think, you know, I think we have to look
though carefully at it. The word private can be misleading in some ways because it is not an island on its own, and it is connected into the into the system, into the broader system. A lot of the underpinning and liquidity will come from the banking system. It is connected into the banking system. That's not bad, that's inevitable. So it's very important that we understand those those interconnections, how they work. Are there points of sort of fragility in there?
That's why the Bank of England we're doing the second system wide exploratory scenario to follow on the one we did on hedge fund activity and major government bomb markets a couple of years ago. So that's the first thing.
The second thing I think is important is, and I think this is particularly true with the spread into sorts of so called retail investment, is do the investors understand the assets they've got and the characteristics of those assets, because there are clearly, you know, there are some science of strains in the market. I think they're often described as idiosyncratic. Okay, every incident will have a different story
attached to it. But we are seeing some increase in requests, quite a bigger increase in requests for outflows to take the liquidity out, and I think how that plays out will depend on what investors think they think well thought they had relative to what they sort of now think they've got.
Just to run through in another area where you've got quite a big distinction now between the UK and the US, or at least there has been. In the proposals you had put forward was for stable coins and the basic approach you'd had towards them. Are you now scrapping the idea of capping the amount of stable coin that individuals and businesses can Well.
We've altogether that for the UK and we'll be coming up with our proposals shortly before the summer.
So it's still because it was supposed to be in June.
I'm expecting well before the sort of summer holiday season takes off for us. We'll get that out.
What are you looking at the sort of looking at total issuance sort of limits instead of that.
Would certainly be an option. Let's see where we get to. I think the other thing that I would emphasize with stable coins is to put the global back on again, is that we are going to have to have sort of what I call sort of rules of the game as it were, for the use of stable coins cross border.
And yeah, we are going to be approaching the point when we really do need to sort of get seriously to work on that side of things, because that's going to be important because again, you know what I always say, what we want to get the benefit of is digital technology and all the benefits that will bring with it with it in the payment system. Now you can do that in all sorts of ways. You can do it. Three central back digital currency you can do it three
tokenized deposits, do it three stable coins. I don't think we should be in any sense sort of you know, biased in our approach to that, but there are going to have to be sort of rules of the road, as it were.
But even saying something similar to that in various ways, you know, for a while, Yes, it doesn't seem like there's any appetite on the other side of the Atlantic to have rules of the road or really very many limits on this part of the market at all. They see it as a big combetitive advantage for the US.
Yes, I mean, but I think, look, I think the rest of the world is going to take a different view on that.
And on the current the central bank digital currency. Again, the US has now gone out of its way to ban in the Genius Act, to ban the US the Federal Reserve from having producing a digital dollar a retail Will there ever be a Bank of England will be a digital pound.
Well, I'm so. Look, we continue to work on it to necess very important we do because it helps us to understand that sort of the underlying technology. For me, I know, I'm probably at the sort of noted skeptical end that on this distribution is I think for me, the question is this, do we need to create a new form of central bank money to satisfy this need
to have digital technology and the payments system. And this is the point we've discussed with the UK banks said, look, you know most of the stock of money is in your accounts. If you think about commercial bank money, they've got most of the money. There's a stock of it in the central bank. So I would say the natural starting point here is to explore the tokenized deposits. That
is what is going on both domestically and internationally. UK banks are looking at it because we know we got ahead in the UK twenty years ago with faster payments. Technology has moved on, We've got to move on and then internationally and you may have seen the other day there was news of a test of the so called Project Agora, which to be is are running, which we're involved in, which I think is a very good thing because that gets to the other big issue, which is
how can we improve cross border payments? Because I'm I always described that as somewhat of the land that time forgot.
I have to I'm putting you because I want this one last question I've had. We've had some quite a lot of the central bankers here have been sort of somewhat bragging about the number of ALI tools they have on their own computers and how they're using it. We're obviously using AI. Our economist team using AI on on what the Bank of England says, and we're judging whether or not it's direction of travel. How are you using it?
We do, so we're we're growing in our use of it. We use it obviously for data and data, we use it for coding, speeding things up. But we do use it in the n PC. We've we've experimented with your staff have with modeling and also you know, we we do start to use it to use things like language models to say, well, if you write the NPC minutes like this, how might it be received?
So this is terrible. So we're now going to have we're going to have a sort of spiral because we are using it. We have we have developed our own economists.
We've noted that, right.
So we've done, you've done yours. The whole thing is.
Against your mom right, Well, that's the way the world. That's the way the world. But it's I mean, it's helpful to us because it does occasionally for things up and it says, look, if you do this, if you I mean, if this is words not This is not about voting or anything. This is about words. This is how we received.
Thank you very much,