Speaker 1: Bloomberg Audio Studios, podcasts, radio news and thank you Governor
Speaker 1: for joining us at this conference. We did have an
Speaker 1: opportunity to hear from you and talk to you about
Speaker 1: monetary policy this morning. But there's also been a lot
Speaker 1: of conversation about AI and the potential impact on the
Speaker 1: economy of AI, but also the cyber security risks associated
Speaker 1: with new AI tools, and of course, most recently the
Speaker 1: one we've been hearing about worrying about is Mythos. Can
Speaker 1: I just confirm have UK banks got access to Mythos now?
Speaker 1: Are they getting it on that trial basis?
Speaker 2: So they don't have access to Mythos at the moment,
Speaker 2: and that's that's an issue that is very important. And
Speaker 2: by the way, this is a very important development. But
Speaker 2: there are other models out there. I mean, Mythhos isn't
Speaker 2: the only model out there. Obviously something of a race
Speaker 2: going along to move the technology on and you know,
Speaker 2: I'm very optimistic that they are either they either just
Speaker 2: have or about to get. The major UK banks have
Speaker 2: access to other models which will get them substantially.
Speaker 1: But just going back to the mythosty because we had
Speaker 1: a story In fact, I think the Anthropics UK and
Speaker 1: Northern Europe's head the company that actually makes Mythos. They
Speaker 1: told Bloomberg last month that it would be within a
Speaker 1: week that UK bank chiefs were going to be able
Speaker 1: to be part of the glass Wing project. So do
Speaker 1: you know what happened?
Speaker 2: Well, there was a yes. So there has been a
Speaker 2: glass Wing Phase two being talked about really for the
Speaker 2: last six weeks or sober it hasn't happened yet, and
Speaker 2: I think this has been somewhat caught up in the
Speaker 2: process with the US administration.
Speaker 1: So just reading between the lines, that sounds like Anthropic
Speaker 1: had certainly told us on Bloomberg Television that it was
Speaker 1: going to be just a matter of days or a
Speaker 1: week or so, and it's the US administration that has potentially.
Speaker 2: Well, we're not party to that process, I think. To
Speaker 2: be fair to Anthropic, I think they have been working
Speaker 2: very hard. They want access to critical parties and it's
Speaker 2: very important they're still, i think actively seeking that. Quite
Speaker 2: why the process is a bit different from one company
Speaker 2: to another, I'm afraid I can't explain to you. Obviously
Speaker 2: from our point of view, given our concern about the
Speaker 2: risks involved, and it's very important that there is access
Speaker 2: and you know what I really want to see is
Speaker 2: there is evolver a process very quickly where we can
Speaker 2: have a sort of controlled but fast process to assess
Speaker 2: these models. And frankly is to what my head of
Speaker 2: IT Tea at the Bank of England told me, is
Speaker 2: a ton of patching that then has to follow very
Speaker 2: quickly to fix the things that these models are finding.
Speaker 1: And I guess and as part of this conversation, I
Speaker 1: guess we also think about. One of the conversations I
Speaker 1: have when I get nervous is when they also talk
Speaker 1: about the open source that the companies that are a
Speaker 1: bit behind. The way they get users is to have
Speaker 1: open source, which means if you discover that the so
Speaker 1: called bad guys are using that technology to rob banks
Speaker 1: or whatever it is, you're then not able to turn
Speaker 1: it off in the way you can with the others.
Speaker 2: Well, look, I'm not speaking as an expert in the subject.
Speaker 2: I honestly have the whole Well, yeah, we try to
Speaker 2: learn quickly. I think two things that I've taken from
Speaker 2: the many discussions we've had. One is that I think
Speaker 2: if you have kept your cyber defenses up and better prepared,
Speaker 2: you will go into this process in a better place
Speaker 2: than if you haven't. And we've worked very hard with
Speaker 2: the UK banks over over many years, and we'll go
Speaker 2: on doing so. Secondly, I think you're right on the
Speaker 2: open source point now. I think one anthropic are certainly
Speaker 2: saying is look, open source is more of a vulnerability
Speaker 2: than closed and that's certainly a conclusion that they've drawn
Speaker 2: from all the work they've done. Now, I mean the
Speaker 2: two things I think however, one is there's a lot
Speaker 2: of open source out there too. Again I'm not an
Speaker 2: expert in this field. There's a lot of almost theological
Speaker 2: you know, doctrine about open source and not open source,
Speaker 2: which this is somewhat pushing against.
Speaker 1: So yeah, I think because we've tended to say there's
Speaker 1: been a sort of inclination towards open But in this
Speaker 1: case it feels like it's question, I mean, does it
Speaker 1: highlight sort of overall the risks of I mean, going
Speaker 1: back to the anthropic thing of having US owned companies
Speaker 1: being absolutely dominant in this space and actually UK banks
Speaker 1: you being in a position of kind of going begging
Speaker 1: to the Americans to get access.
Speaker 2: Well, I don't take it position on where the sort
Speaker 2: of in the sense that the companies are based that
Speaker 2: are developing these things, because this is this is a
Speaker 2: very very big development, and it's actually very important, and
Speaker 2: there are many good things that will come out of this.
Speaker 2: What I would say is that the spillovers from this
Speaker 2: sort of some cyber risk are so big that we
Speaker 2: can't just have a single sort of national approach towards
Speaker 2: dealing with the consequences and mitigating it. There's got to
Speaker 2: be an international approach to this. It's got to be
Speaker 2: a sensible, sort of firmly based on international process. Because
Speaker 2: I think any body of thought, well, i've dealt with
Speaker 2: my banks, that's okay. I'm afraid that won't work because
Speaker 2: they're all so heavily interconnected. We've got big payment systems,
Speaker 2: big messaging systems, so that approach mon't work. Now.
Speaker 1: As chair of the Financial Stability Board, you obviously involved
Speaker 1: in lots of discussions around sort of global efforts or
Speaker 1: financial stability and looking for risks. And one area again
Speaker 1: where people are looking nervously at the US in particular
Speaker 1: is the run up of private credit and whether there
Speaker 1: should be more of a sort of a tougher approach
Speaker 1: to at least having more reporting requirements or other things.
Speaker 1: On private credit. You've highlighted that a lot of traditional
Speaker 1: banks and institutions are now very much intertwined private credit.
Speaker 1: Is that I mean, are you getting a hearing on
Speaker 1: that from the US in terms of the risks of that?
Speaker 2: Excuse me? Yes, I think first of all, private credit
Speaker 2: is playing an important role. I think it's a good thing.
Speaker 2: Let's come back to AI for a moment. We've got
Speaker 2: a very big investment demand going on for it to
Speaker 2: support the innovation in AI and in the tech sector
Speaker 2: more broadly, and private private credit is an important part
Speaker 2: of meeting that demand, and that's a good thing. What
Speaker 2: I think, you know, I think we have to look
Speaker 2: though carefully at it. The word private can be misleading
Speaker 2: in some ways because it is not an island on
Speaker 2: its own, and it is connected into the into the system,
Speaker 2: into the broader system. A lot of the underpinning and
Speaker 2: liquidity will come from the banking system. It is connected
Speaker 2: into the banking system. That's not bad, that's inevitable. So
Speaker 2: it's very important that we understand those those interconnections, how
Speaker 2: they work. Are there points of sort of fragility in there?
Speaker 2: That's why the Bank of England we're doing the second
Speaker 2: system wide exploratory scenario to follow on the one we
Speaker 2: did on hedge fund activity and major government bomb markets
Speaker 2: a couple of years ago. So that's the first thing.
Speaker 2: The second thing I think is important is, and I
Speaker 2: think this is particularly true with the spread into sorts
Speaker 2: of so called retail investment, is do the investors understand
Speaker 2: the assets they've got and the characteristics of those assets,
Speaker 2: because there are clearly, you know, there are some science
Speaker 2: of strains in the market. I think they're often described
Speaker 2: as idiosyncratic. Okay, every incident will have a different story
Speaker 2: attached to it. But we are seeing some increase in requests,
Speaker 2: quite a bigger increase in requests for outflows to take
Speaker 2: the liquidity out, and I think how that plays out
Speaker 2: will depend on what investors think they think well thought
Speaker 2: they had relative to what they sort of now think
Speaker 2: they've got.
Speaker 1: Just to run through in another area where you've got
Speaker 1: quite a big distinction now between the UK and the US,
Speaker 1: or at least there has been. In the proposals you
Speaker 1: had put forward was for stable coins and the basic
Speaker 1: approach you'd had towards them. Are you now scrapping the
Speaker 1: idea of capping the amount of stable coin that individuals
Speaker 1: and businesses can Well.
Speaker 2: We've altogether that for the UK and we'll be coming
Speaker 2: up with our proposals shortly before the summer.
Speaker 1: So it's still because it was supposed to be in June.
Speaker 2: I'm expecting well before the sort of summer holiday season
Speaker 2: takes off for us. We'll get that out.
Speaker 1: What are you looking at the sort of looking at
Speaker 1: total issuance sort of limits instead of that.
Speaker 2: Would certainly be an option. Let's see where we get to.
Speaker 2: I think the other thing that I would emphasize with
Speaker 2: stable coins is to put the global back on again,
Speaker 2: is that we are going to have to have sort
Speaker 2: of what I call sort of rules of the game
Speaker 2: as it were, for the use of stable coins cross border.
Speaker 2: And yeah, we are going to be approaching the point
Speaker 2: when we really do need to sort of get seriously
Speaker 2: to work on that side of things, because that's going
Speaker 2: to be important because again, you know what I always say,
Speaker 2: what we want to get the benefit of is digital
Speaker 2: technology and all the benefits that will bring with it
Speaker 2: with it in the payment system. Now you can do
Speaker 2: that in all sorts of ways. You can do it.
Speaker 2: Three central back digital currency you can do it three
Speaker 2: tokenized deposits, do it three stable coins. I don't think
Speaker 2: we should be in any sense sort of you know,
Speaker 2: biased in our approach to that, but there are going
Speaker 2: to have to be sort of rules of the road,
Speaker 2: as it were.
Speaker 1: But even saying something similar to that in various ways,
Speaker 1: you know, for a while, Yes, it doesn't seem like
Speaker 1: there's any appetite on the other side of the Atlantic
Speaker 1: to have rules of the road or really very many
Speaker 1: limits on this part of the market at all. They
Speaker 1: see it as a big combetitive advantage for the US.
Speaker 2: Yes, I mean, but I think, look, I think the
Speaker 2: rest of the world is going to take a different
Speaker 2: view on that.
Speaker 1: And on the current the central bank digital currency. Again,
Speaker 1: the US has now gone out of its way to
Speaker 1: ban in the Genius Act, to ban the US the
Speaker 1: Federal Reserve from having producing a digital dollar a retail
Speaker 1: Will there ever be a Bank of England will be
Speaker 1: a digital pound.
Speaker 2: Well, I'm so. Look, we continue to work on it
Speaker 2: to necess very important we do because it helps us
Speaker 2: to understand that sort of the underlying technology. For me,
Speaker 2: I know, I'm probably at the sort of noted skeptical
Speaker 2: end that on this distribution is I think for me,
Speaker 2: the question is this, do we need to create a
Speaker 2: new form of central bank money to satisfy this need
Speaker 2: to have digital technology and the payments system. And this
Speaker 2: is the point we've discussed with the UK banks said, look,
Speaker 2: you know most of the stock of money is in
Speaker 2: your accounts. If you think about commercial bank money, they've
Speaker 2: got most of the money. There's a stock of it
Speaker 2: in the central bank. So I would say the natural
Speaker 2: starting point here is to explore the tokenized deposits. That
Speaker 2: is what is going on both domestically and internationally. UK
Speaker 2: banks are looking at it because we know we got
Speaker 2: ahead in the UK twenty years ago with faster payments.
Speaker 2: Technology has moved on, We've got to move on and
Speaker 2: then internationally and you may have seen the other day
Speaker 2: there was news of a test of the so called
Speaker 2: Project Agora, which to be is are running, which we're
Speaker 2: involved in, which I think is a very good thing
Speaker 2: because that gets to the other big issue, which is
Speaker 2: how can we improve cross border payments? Because I'm I
Speaker 2: always described that as somewhat of the land that time forgot.
Speaker 1: I have to I'm putting you because I want this
Speaker 1: one last question I've had. We've had some quite a
Speaker 1: lot of the central bankers here have been sort of
Speaker 1: somewhat bragging about the number of ALI tools they have
Speaker 1: on their own computers and how they're using it. We're
Speaker 1: obviously using AI. Our economist team using AI on on
Speaker 1: what the Bank of England says, and we're judging whether
Speaker 1: or not it's direction of travel. How are you using it?
Speaker 2: We do, so we're we're growing in our use of it.
Speaker 2: We use it obviously for data and data, we use
Speaker 2: it for coding, speeding things up. But we do use
Speaker 2: it in the n PC. We've we've experimented with your
Speaker 2: staff have with modeling and also you know, we we
Speaker 2: do start to use it to use things like language
Speaker 2: models to say, well, if you write the NPC minutes
Speaker 2: like this, how might it be received?
Speaker 1: So this is terrible. So we're now going to have
Speaker 1: we're going to have a sort of spiral because we
Speaker 1: are using it. We have we have developed our own economists.
Speaker 2: We've noted that, right.
Speaker 1: So we've done, you've done yours. The whole thing is.
Speaker 2: Against your mom right, Well, that's the way the world.
Speaker 2: That's the way the world. But it's I mean, it's
Speaker 2: helpful to us because it does occasionally for things up
Speaker 2: and it says, look, if you do this, if you
Speaker 2: I mean, if this is words not This is not
Speaker 2: about voting or anything. This is about words. This is
Speaker 2: how we received.
Speaker 1: Thank you very much,