The gathering swarm: emergent AGI and the rise of distributed intelligence

Mohammed Gharbawi

Rapid advances in artificial intelligence (AI) have fuelled a lively debate on the feasibility and proximity of artificial general intelligence (AGI). While some experts dismiss the concept of AGI as highly speculative, viewing it primarily through the lens of science fiction (Hanna and Bender (2025)), others assert that its development is not merely plausible but imminent (Kurzweil (2005); (2024)). For financial institutions and regulators, this dialogue is more than theoretical: AGI has the potential to redefine decision-making, risk management, and market dynamics. However, despite the wide range of views, most discussions of AGI implicitly assume that its emergence will be as a singular, centralised, and identifiable entity, an assumption this paper critically examines and seeks to challenge.

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When mortgage flexibility meets monetary policy tightening: heterogeneous impacts on spending and debt

Philippe Bracke, Matt Everitt, Martina Fazio and Alexandra Varadi

The Bank of England Agenda for Research (BEAR) sets the key areas for new research at the Bank over the coming years. This post is an example of issues considered under the Macroeconomic Environment Theme which focuses on the changing inflation dynamics and unfolding structural change faced by monetary policy makers.

How do mortgagors adjust spending, savings and debt during monetary tightening? In a recent paper, we explore this question using a novel data set on household transactions and mortgage records. About 30% of households used mortgage flexibility when facing higher borrowing costs since late 2021, as their fixed-rate contracts ended. Some extended repayment periods to lower monthly payments, while others increased borrowing by extracting housing equity – leveraging nominal price gains since the pandemic – to sustain spending and reduce unsecured debt. Those unable or unwilling to use mortgage flexibility, cut spending significantly. We thus document the dual role of mortgage flexibility at refinancing: it helps smooth consumption aiding financial resilience; but it may also dampen monetary policy transmission for some households.

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Once upon a time in the future: strategic foresight in central banks

Julia Giese and Jacqueline Koay

We live in an era of rapid change, complexity and uncertainty. Over recent years, severe global shocks have been frequent, with profound implications for our economy and financial system. Yet such shocks are impossible to forecast with any precision as they are not extrapolations of past relationships. Our economy and financial system are subject to longer-running trends such as technological advances, demographics, geopolitical shifts and climate change which can be blown off course or altered in unexpected ways. Where forecasts are bound to fail, strategic foresight tools can help as they are a means for practitioners to understand the dynamics of change (and how this could impact the economy and financial stability) by imagining different futures and telling stories around how trends might interact to give rise to unforeseen shocks.

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More mortgage lending might push home ownership further out of reach

Jamie Waddell and Danny Walker

Would expanding mortgage supply lead to increased home ownership? Given that 90% of young home owners have a mortgage, it’s tempting to assume the answer is yes. But our analysis suggests that assumption is not necessarily true. We show that increases in mortgage supply have historically had no discernible effect on the home ownership rate and instead tend to push up on house prices, which makes it harder for first-time buyers (FTBs) to afford their first home. They also tend to divert lending towards home-movers and there is some evidence that they increase rents too.

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Collateral re-use: unveiling the risk of delivery failures and higher volatility in the repo market

Miruna-Daniela Ivan

The widespread practice of financial institution to re-use securities received as collateral plays a key role in the repurchase agreement (repo) market functioning. By increasing the availability of securities which can be used as collateral, collateral re-use lowers funding costs under normal market conditions, allowing collateral to flow to where it is most needed. But this activity may amplify the risk of delivery failures and increase volatility in repo rates during periods of market stress. This article explores the level of collateral re-use in the gilt repo market, applying algorithms from academic literature to the Bank’s Sterling Money Market Data, and provides supporting evidence of collateral re-use procyclicality, and its positive relation to repo rates volatility.

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Could digitalisation of finance lead to more disruptive international capital flows?

Simon Whitaker

Digital currencies and the tokenisation of financial assets could speed up the movement of money and assets between institutions and across borders. Historically, the liberalisation of capital flows led to debates about the impact on macroeconomic and financial stability. Bouts of instability – for example the 2008 global financial crisis – provoked calls to put ‘sand in the wheels’ of financial markets. In this blog I argue there is no reason why lubricating capital flows through digitalisation should herald a new era of financial instability. But the architecture of the global financial safety net may need to evolve to contain risks to the international monetary and financial system.

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(Updated) A benchmark global carbon price to support climate risk metrics

This post was updated on 19 September 2025

Mike Knight

Since the original post, published 17 April 2025, I’ve received feedback from carbon industry participants on the possibility of a global-level benchmark price. Put simply, this feedback endorsed key points in the original post – that, for the reasons set out in the post, there does not exist a credible global-level benchmark carbon price. Moreover, to remedy this situation, industry participants raised the concept of co-creation – that the stronger the signal from the public sector on the benefits and use cases of such a benchmark, the greater the likelihood that the private sector could provide and administer it. Go to the end to continue reading.

In this post, I argue that, to strengthen climate risk metrics, the pricing of carbon should be transparent and consistent. I suggest that lessons can be learned from existing commodities and interest rate markets in the role a benchmark price (for carbon) could play to provide that transparency and consistency. Further, I propose that a benchmark incorporating existing explicit and implicit carbon prices could be sufficiently credible to allow widespread adoption. I then propose a high-level methodology for such a benchmark.

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Forbearance lending as a crisis management tool

Isabelle Roland, Yukiko Saito and Philip Schnattinger

The Bank of England Agenda for Research (BEAR) sets the key areas for new research at the Bank over the coming years. This post is an example of issues considered under the Prudential Architecture Theme which focuses on the evolving regulatory structures and fresh strategic issues for regulators and supervisors.

Interventions in corporate credit markets have featured prominently in the policy response to crisis episodes over the last two decades. Loan forbearance features prominently among those interventions by lenders and/or regulators. It is a practice whereby banks grant temporary relief to struggling borrowers, to avoid default. On balance, the literature is critical of loan forbearance in the corporate sector because of its potential to contribute to zombification – a situation where bank lending keeps unproductive firms alive, resulting in lower aggregate total factor productivity. Results from our new paper show that forbearance lending in combination with business restructuring plans can provide temporary relief for struggling firms, safeguarding output and employment, without contributing to the zombification of the corporate sector. Note that our research is focused on the impact of forbearance on the corporate sector; the impact of forbearance on lenders is a separate question outside the scope of our paper.

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Tracking the price of carbon: price substitution effects across energy markets

Dooho Shin and Rebecca Mari

The Bank of England Agenda for Research (BEAR) sets the key areas for new research at the Bank over the coming years. This post is an example of issues considered under the Financial System Theme which focuses on the shifting landscape and new risks confronting financial policymakers.

Carbon pricing has emerged as one of the main mitigation measures adopted around the world to fight climate change. In the UK and EU, increases in carbon prices in the Emissions Trading Schemes (ETS) work as an incentive to substitute away from emissions-intensive activities and sources of power. Such increases can be a result of direct government policies, but as we explain in this post, changes in carbon prices appear to be also endogenously linked to developments in energy markets. An understanding of the possible transmission channels underlying the relationship between the two is important to assess how climate-related risks are linked to broader macroeconomic developments and thus monetary and financial stability.

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Global financial centre and its regulators: what’s the strategy when everyone wants to be the top dog?

Carlos Cañón Salazar, John Thanassoulis and Misa Tanaka

Several global financial centres, including London, Hong Kong and Singapore, are overseen by financial regulators with an objective on competitiveness and growth. In a recent staff working paper, we develop a theoretical model to show that some competitive deregulation can arise when several regulators are focused on growth, though not a ‘race-to-the-bottom’: regulators will not lower regulations to levels favoured by banks if the costs of financial instability are large. To maintain competitiveness and stability of the UK as a global financial centre, there is a need for a comprehensive strategy which takes into account both regulatory and non-regulatory measures. This may require coordination across multiple institutions.

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