The Bank of England published the record of its Financial Policy Committee meeting on 30 September, and AI financing runs through it. The committee, which met on 25 September, judged that the likelihood of interconnected vulnerabilities in the financial system crystallising together has risen since July, and listed AI-related debt issuance alongside the re-escalation of conflict in Iran and higher sovereign bond yields as the reasons.
The number that carries the argument is the volume. Global AI-related debt issuance totalled around $450bn by early September, more than double the amount issued across the whole of 2025.
The sterling market is now substantially an AI market
The committee’s sharpest domestic figure is that AI hyperscaler issuance accounted for 47% of sterling corporate bond issuance so far this year. That is a concentration statistic rather than a credit judgement, but it means a UK institution holding a diversified sterling corporate book has less diversification than it had a year ago.
Private credit is expected to finance roughly $700bn of data centre capital spending between 2026 and 2028, a market the committee has repeatedly described as harder to see into than public bond markets.
Opacity and circularity
The committee named the structure of the financing, not only its size. It flagged “opacity and, at times, ‘circular arrangements’ that can be associated with this financing”, and said such structures could amplify losses if expectations disappoint. Circular arrangements is the polite term for deals in which a supplier invests in a customer that then buys the supplier’s product — a pattern that has become common across the sector’s compute agreements.
On valuations, the record notes that equity valuations for AI companies fell sharply in July and warns that a more significant shock to earnings expectations could trigger a sharper repricing with effects beyond the sector.
Lending is already repricing
The record contains a line that will be read closely by companies outside the sector: there remains less appetite among lenders to lend to firms at risk of revenue erosion from AI, to smaller firms, and to construction and hospitality firms with a weak track record. Being on the wrong side of an AI disruption story is now a named credit factor.
Cyber risk is in the same document
The committee also referred to recent AI test-environment incidents, saying they demonstrated that increasingly autonomous models could take unexpected actions, including exploiting vulnerabilities, and that this reinforces the need for cyber preparedness. That is a financial stability body citing lab safety incidents as an operational risk to the system it supervises.
What it decided
The FPC kept the UK countercyclical capital buffer at its neutral setting of 2% and agreed to proceed with proposed leverage ratio reforms, with a consultation expected in early 2027. It judged that households, companies and the UK banking system remain resilient.
What to watch
Whether the share of sterling issuance taken by AI borrowers keeps rising into 2027, and whether the Bank moves from describing circular financing to asking supervised firms to quantify their exposure to it.
