UK financial firms heavily reliant on US tech giants for AI services.
Britain’s financial watchdogs are not doing enough to stop artificial intelligence from harming consumers or destabilising markets, a cross-party group of lawmakers said on Tuesday, urging regulators to move away from what it called a “wait and see” approach.
In a report on AI in financial services, the Treasury Committee said the Financial Conduct Authority and the Bank of England should start running AI-specific stress tests to help firms prepare for market shocks triggered by automated systems.
The committee also called on the FCA to publish detailed guidance by the end of 2026 on how consumer protection rules apply to AI, and on the extent to which senior managers should be expected to understand the systems they oversee.
“Based on the evidence I’ve seen, I do not feel confident that our financial system is prepared if there was a major AI-related incident and that is worrying,” committee chair Meg Hillier said in a statement.
TECHNOLOGY CARRIES ‘SIGNIFICANT RISKS’ A race among banks to adopt agentic AI, which unlike generative AI can make decisions and take autonomous action, runs new risks for retail customers, the FCA told Reuters late last year.
About three-quarters of UK financial firms now use AI. Companies are deploying the technology across core functions, from processing insurance claims to performing credit assessments.
While the report acknowledged the benefits of AI, it warned the technology also carried “significant risks” including opaque credit decisions, the potential exclusion of vulnerable consumers through algorithmic tailoring, fraud, and the spread of unregulated financial advice through AI chatbots.
Experts contributing to the report also highlighted threats to financial stability, pointing to the reliance on a small group of U.S. tech giants for AI and cloud services. Some also noted that AI-driven trading systems may amplify herding behaviour in markets, risking a financial crisis in a worst-case scenario.
An FCA spokesperson said the regulator welcomed the focus on AI and would review the report. The regulator has previously indicated it does not favour AI-specific rules due to the pace of technological change.
The BoE did not respond to a request for comment.
Hillier told Reuters that increasingly sophisticated forms of generative AI were influencing financial decisions. “If something has gone wrong in the system, that could have a very big impact on the consumer,” she said.
Separately, Britain’s finance ministry appointed Starling Bank CIO Harriet Rees and Lloyds Banking Group ’s Rohit Dhawan as “AI Champions” to help steer AI adoption in financial services.
International financial integration is often measured through national totals. Yet these totals can conceal very…
The 20th century shift from sterling to the dollar is often cited as evidence that…
The US trade deficit in goods unexpectedly widened in September as imports increased, suggesting that…
The countries of Europe and Central Asia (ECA) cannot afford to miss the opportunity that…
Counting the number of people living in extreme poverty — on less than $3 a…
Recent disruptions to global oil markets, from Russia’s invasion of Ukraine to the war in…