Today\u2019s need-to-know storiesAI could cause economic downturn, Bailey warns G20<\/p>\n
Bank of England governor Andrew Bailey has warned that a sharp fall in AI company valuations could trigger a global economic downturn by exposing vulnerabilities across financial markets.<\/p>\n
In a letter<\/a> to G20 finance ministers on Monday, Bailey said markets remained vulnerable to a \u201cpotentially disorderly correction that could spread across borders, particularly given fragilities in sovereign debt markets\u201d.<\/p>\n \u201cThe issue is not simply that investors are borrowing more, but that leverage is interacting with high valuations and market concentration, in particular the increasing cross-investment between AI companies and hyperscalers, in a way that could amplify a future market correction,\u201d he wrote.\u00a0<\/p>\n \u201cI remain concerned, therefore, that a large shock or combination of shocks could concurrently trigger multiple vulnerabilities.\u201d\u00a0<\/p>\n Bailey\u2019s letter follows concerns raised by the Bank of England in July over stretched AI company valuations, cyber security risks and increasingly complex debt structures tied to the sector.\u00a0<\/p>\n Swiss lawmakers propose compromise on UBS capital rules<\/p>\n Swiss lawmakers have proposed allowing UBS to meet half of the capital requirement for its foreign subsidiaries with cheaper additional Tier 1 debt, rejecting the government\u2019s requirement for full common equity Tier 1 backing.<\/p>\n The Economic Affairs and Taxation Committee of Switzerland\u2019s upper house said on Monday that UBS should hold 50 per cent of the requirement in CET1, the highest-quality form of bank capital, and use AT1 bonds, a cheaper form of loss-absorbing capital, for the remainder, Reuters reported.<\/p>\n The proposal must still pass both chambers of the Swiss parliament, with a final decision expected in 2027 at the latest.\u00a0<\/p>\n \u201cThis is not a victory for UBS, it\u2019s a solution that serves Switzerland,\u201d committee president Erich Ettlin said.\u00a0<\/p>\n The Swiss government had proposed requiring UBS to fully capitalise its foreign subsidiaries with around $20bn in additional CET1 capital as part of tougher too-big-to-fail rules drawn up following the collapse of Credit Suisse and its emergency takeover by UBS in 2023.\u00a0<\/p>\n UBS has argued that the requirement is excessive and would make it less competitive against international rivals while damaging Switzerland\u2019s position as a financial centre.<\/p>\n LSE partners with Payward for tokenisation offering<\/p>\n The London Stock Exchange is partnering with Payward, the owner of crypto exchange Kraken, to offer tokenised versions of leading UK shares on its planned night-time trading venue from 2027.<\/p>\n The tokens will track the prices of underlying shares and are expected to include some of the UK\u2019s largest listed companies, subject to approval from the Financial Conduct Authority, the FT reported.<\/p>\n Each token will be backed one-for-one by a conventional share but will not give holders legal ownership of the company, full voting rights or entitlement to dividends.<\/p>\n Simon McQuoid-Mason, who leads new product development at the LSE, told the newspaper that tokenised equities provide \u201ca synthetic exposure to the underlying [stock]\u201d while tracking its price. He added that the LSE was exploring how a \u201cfull rights-bearing token\u201d could be developed.<\/p>\n The LSE announced in July that its separate night-time trading venue would launch in the first half of 2027 and operate five days a week.<\/p>\n Banks seek financial dividend from AI\u2019s effect on law firms<\/p>\n Wall Street banks are challenging the traditional business model of large law firms, arguing that AI should bring down legal fees as routine work becomes faster and cheaper to complete.<\/p>\n As reported by the FT, in-house lawyers at Morgan Stanley and Citigroup said they have asked law firms to adopt new payment arrangements that would reduce their legal costs.<\/p>\n Goldman Sachs has also asked law firms how much AI is improving their efficiency and expects to share in the resulting savings, according to two people familiar with the matter cited by the newspaper.<\/p>\n \u201cIf the number of hours they\u2019re working on a matter has come down because of AI .\u2009.\u2009. our expectation is for costs to come down significantly per transaction,\u201d said Adam Meshel, Citi\u2019s global head of legal.<\/p>\n MAS to invest $173mn in fintech development <\/p>\n The Monetary Authority of Singapore is to commit $173mn over three years to support fintech development and adoption under its Financial Sector Technology and Innovation Scheme.<\/p>\n The forthcoming tranche of the scheme will focus on supporting financial institutions and fintech companies in developing, deploying and scaling new solutions. Key focus areas will include AI, distributed ledger technology, quantum technology and digital assets. <\/p>\n There will be six tracks for the development of these projects, including manpower, where MAS will co-fund internships, supporting at least 1,000 fintech internships over the course of the project. <\/p>\n The AI Pathfinder track will support financial institutions in adopting market-ready AI solutions listed on MAS\u2019s own PathFin.ai platform. <\/p>\n Last month, Singapore\u2019s DBS Bank announced it was partnering with the Institute of Banking and Finance Singapore to develop an AI-led skills and workforce programme<\/a> for the financial sector. DBS has committed to support 500 Singaporeans through its management associate, internship and traineeship programmes.<\/p>\n HDFC begins search for new CEO <\/p>\n India\u2019s HDFC has begun looking for a new CEO after Sashidhar Jagdishan announced he would not be seeking another term. <\/p>\n Jagdishan has been CEO of India\u2019s second-largest bank by assets since 2020, having spent three decades at the bank. He will retire from the bank in October. <\/p>\n The bank\u2019s share price fell 1.6 per cent to a 30-month low on the news of Jagdishan\u2019s departure. <\/p>\n HDFC is to hire a headhunter to help find a new CEO, according to Bloomberg, with speculation that the bank\u2019s deputy managing director Kaizad Bharucha and executive director V Srinivasa Rangan could be in the running. External candidates may include Axis Bank CEO Amitabh Chaudhry and former chair of State Bank of India Dinesh Khara. <\/p>\n