UK financial regulators aren’t moving fast enough to curb AI-related risks to consumers or market stability, lawmakers, pressing for a shift away from a wait-and-see posture as automated systems spread across finance.
The Treasury Committee said the Financial Conduct Authority and the Bank of England should begin AI-specific stress testing. The goal is basic readiness.
Automated systems already influence pricing, trading, claims, and credit. Shock scenarios now look different.
The committee also urged the FCA to publish guidance by the end of 2026 clarifying how consumer protection rules apply to AI and what level of understanding senior managers must hold over systems operating under their authority.
Committee chair Meg Hillier said the evidence left her unconvinced the system is ready for a serious AI-related failure. The risk isn’t abstract. A single incident could cascade quickly across firms and customers.
Agentic AI, which takes autonomous action rather than producing content, adds pressure. The FCA told Reuters late last year that banks racing to deploy these tools expose retail customers to new failure modes. About 75% of UK financial firms already use AI across core functions, including insurance claims processing and credit assessments.
The report acknowledged efficiency gains, then pivoted to risk. Opaque credit outcomes. Algorithmic tailoring excluding vulnerable customers. Unregulated financial advice delivered through chatbots. These issues scale fast once embedded.
Witnesses also flagged financial stability concerns. Dependence on a narrow group of US technology providers for AI and cloud services concentrates operational risk.
AI-driven trading systems could intensify herding behaviour, amplifying market moves rather than dampening them.
The FCA said it would review the report. The regulator has previously resisted AI-specific rules, arguing technology shifts too quickly for bespoke regulation.
A Bank of England spokesperson said the central bank has taken steps to assess AI risks and strengthen resilience, and will consider the committee’s recommendations before responding.
Hillier told Reuters that increasingly capable generative AI already influences financial decisions. System failures, she said, would land hardest on consumers.
Separately, the UK finance ministry appointed Starling Bank CIO Harriet Rees and Lloyds Banking Group executive Rohit Dhawan to advise on steering AI adoption across financial services.
