UK Regulators Sound Alarm on AI in Financial Services as Autonomous Agents Reshape Markets

UK regulator warns of "arms race" to keep up with AI use in financial services

Regulators are in an "arms race" to keep up with the use of artificial intelligence in financial services, a senior UK official has warned, with millions of people using the technology to help them make personal finance decisions. Sheldon Mills, an executive director at the Financial Conduct Authority, told the FT the watchdog would need greater powers to stay on top of the rapid growth of AI and urged UK authorities to review whether the use of ChatGPT, Claude, Gemini, and other large language models should be subject to their rules. Speaking ahead of the publication on Monday of an FCA-commissioned report he has written on the impact of AI in financial services, Mills said regulators in the area would have to embrace AI themselves to keep up with the "speed, pace, and scale of change" the technology is bringing to the sector and to help "monitor, detect, and tackle the risks." "It is an arms race," he added. Mills' report identifies benefits and risks from increasing use of AI in financial services. "Hyper-personalization could help better match products to needs, but also enable bias, opaque pricing, and personalized manipulation," it says, according to a summary seen by the FT. It recommends the FCA carries out a review in the next three to six months to examine the risks of companies providing financial services outside the remit of the regulator as well as "consumer harm" from the increasingly popular use of AI models for managing people's personal finances. Research commissioned by Mills found a fifth of UK adults were already open to using AI models to make financial decisions for them, such as on savings or borrowing, even though they are not covered by regulation and there is no recourse to compensation if things go wrong. "Some firms have said to us that they feel that this could be an economically equivalent type of service that isn't regulated [and] sits outside of the regulatory perimeter," he said, pointing out there were "reasonably strict" rules for regulated companies giving similar recommendations. "Is the fact that the chat model might be able to respond to prompts and have a conversation something closer to a recommendation, or guidance?" he asked. But he also said AI could "democratize" finance by widening access to sophisticated services currently only available to the richest customers. He said people earning only £20,000 a year could gain access to financial advice usually only available "to somebody who has got £10mn in savings or assets," adding: "I mean what's not to like about that?" His report recommends the FCA convenes public and private sector groups to develop an "AI-enabled financial capability service" that provides free information and guidance to the British public on their financial choices. Many financial services companies are already piloting AI agents that can autonomously carry out financial transactions for companies and consumers. Mills, who is leaving after eight years at the FCA, said managers would still need to be accountable for the actions of their AI models. "You need a human on the hook for what they're doing," he said. AI is likely to "amplify" the threat of fraud and cyber attacks, the report says, calling for the technology to be used to defend the system from such threats. "Deepfakes, synthetic identities, and personalized social engineering are taking fraud and cyber risks into a new era and changing how fraud and cyber attacks," it says. Mills' report also recommends boosting the FCA's powers under the "critical third parties" regime that allows it to supervise key technology providers to the financial sector, such as Anthropic, OpenAI, Amazon, Google, and Microsoft. The government is yet to decide which Big Tech groups to designate under the regime, which allows regulators to impose more robust disclosure requirements, including annual self-assessments and "scenario testing" of their ability to withstand severe disruptions. The report says the FCA could also seek extra powers under the "designated activities regime" that allows it to regulate specific activities without requiring the firms carrying them out to be authorized. The FCA board is due to discuss the report from Mills before deciding how to respond to its recommendations. The watchdog has been criticized by some politicians for a 12-week contract it agreed with US tech group Palantir to test whether its AI systems can help fight financial crime. Some MPs have raised concerns the contract could give US authorities access to sensitive UK financial information. The FCA and Palantir have denied this. Mills declined to comment on the Palantir contract. This story has been amended to clarify that research commissioned by Sheldon Mills found that a fifth of UK adults were open to using AI models to make financial decisions for them.

How AI is changing the world of retail investment

AI is rapidly transforming the world of personal investment. Retail savers around the world are asking chatbots for investment strategies, debt management plans and stock tips. Adoption is happening quickly: research found a fifth of UK adults were open to using AI models to make financial decisions for them. UK regulators are taking notice. The Financial Conduct Authority this week published the Mills Review, which highlights new risks from the use of AI in retail financial services. Regulators are wise to pay attention to emerging technologies but should avoid saddling them with excessive regulations. As governments around the world develop responses to the use of AI in retail financial services, they can mitigate risks while ensuring that citizens can still reap the benefits of large language models. AI tools could empower a generation of savers to take control of their financial futures and invest their money wisely. LLMs are increasingly filling the role that personal finance books and blogs have played, educating everyday people on ways to invest their money. Beyond summarising points, a model can tailor its responses to a set of criteria, answer specific questions and redirect users to more information. The technology has the potential to democratise access to useful resources. But these technologies also raise new questions. In the UK, companies that provide investment advice have registration requirements, fiduciary responsibilities and disclosure duties. The law distinguishes between formal advice, provided by a regulated adviser and tailored to an individual's circumstances, and generic guidance, such as a static webpage that discusses investment strategies. This distinction can be blurred by the emergence of generative and agentic AI financial tools. There is also the problem of liability. Customers have recourse against regulated financial advisers who give poor advice, but AI agents are information aggregators that do not provide users with the same liability protections. The Mills Report highlights how many retail financial services customers do not appreciate this distinction: only 40 per cent of survey participants understood that they had no formal recourse against bad financial advice from general-purpose AI. Small interventions could play a role in helping consumers avoid financial misfortune. AI models should provide disclaimers when sharing anything that could be misconstrued as investment advice. And as services such as OpenAI's ChatGPT roll out advertisements, in the UK they will be required to comply with disclosure requirements for sponsored financial content. The FCA should avoid being overzealous in its approach to regulation. Saddling companies with excessive burdens that aim to protect consumers could in fact do them harm. In the past, the FCA's Retail Distribution Review attempted to improve the quality of investment advice, but instead increased the cost of advice for the average consumer, leading to an "advice gap". Over-regulation of financial advice pushed many people towards online "finfluencers" who offer lower-quality information. Regulators might learn from past mistakes as they consider regulating AI. New financial technologies highlight the urgent need for widespread personal finance education, including as part of school curricula. Young people ought to be taught traditional financial literacy skills and educated on the uses and limitations of AI tools for their finances. Regulation will always lag behind the latest technology. An educated public is the best protection against any harm from AI advice.

Agentic AI may require regulatory reform, BOE's Breeden says

LONDON, June 30 (Reuters) - More sophisticated regulatory frameworks may be needed to monitor and contain the risks AI poses to the financial system, one of the Bank of England's deputy governors said on Tuesday. Speaking at the European Central Bank Forum on central ⁠banking in Portugal, Sarah Breeden, deputy governor for financial stability, said the rapid rise in capabilities of AI agents that can act autonomously had exposed potential gaps. "Our frameworks were not built to contemplate autonomous agents, and relying on a human in the loop for all agent actions is unlikely to ⁠be realistic. More sophisticated governance and accountability frameworks may be needed," Breeden said. Regulators and global standard-setting bodies have repeatedly warned about the risks posed by the rollout ⁠of AI across the financial sector since Anthropic released Mythos that could pose significant cybersecurity challenges to the banking industry, ⁠analysts say. The Financial Stability Board earlier in June called for tighter safeguards to guard against ⁠the risks of AI agents, which, it said, posed a distinct challenge to human oversight. Reporting by Phoebe Seers; Editing by Sharon Singleton and Barbara Lewis Our Standards: The Thomson Reuters Trust Principles., opens new tab

Bank of England's Breeden warns AI agents could trigger market meltdowns

Deputy governor Sarah Breeden says autonomous trading agents could amplify volatility if they all react the same way at once, and may demand new rules. The nightmare a central banker describes is rarely a crash. It is a feedback loop. Speaking at the European Central Bank's annual forum in Sintra, Portugal, the Bank of England's deputy governor Sarah Breeden warned that autonomous artificial intelligence agents could cause a "market meltdown." Not by acting irrationally, but by acting identically, all of them responding the same way to the same signal at the same moment. Breeden's concern is specific to a new generation of AI. The worry is not the algorithmic trading that has driven markets for years, but agentic systems that can pursue goals and make decisions with far less human supervision. If many firms deploy agents trained in similar ways on similar data, she argued, those agents could "amplify volatility in stress," reacting to a shock in lockstep and turning a wobble into a rout before any human has time to intervene. The mechanism is the danger. Markets have always been vulnerable to herd behaviour, but human herds are slow and uneven; people hesitate, disagree, and panic at different speeds. A population of AI agents optimised toward the same objectives could move as one, selling into the same decline or chasing the same trade with a synchronised speed and scale no crowd of traders could match. The result would be sharper swings, faster, with the correlation between agents acting as an accelerant. Breeden, who speaks for the Bank on financial stability, suggested the existing rulebook may not be equal to the problem. More sophisticated regulatory frameworks may be needed to monitor and contain the risks AI poses to the financial system, she indicated, a notable signal from a senior policymaker that the tools built to oversee human-run markets might not capture what happens when the participants are autonomous software. The warning is not isolated. The Bank of England has been flagging AI-related risks to financial stability for months, folding them into its broader assessments of what could go wrong in markets, and Breeden's Sintra remarks sharpen a theme regulators on both sides of the Atlantic have begun to circle. The question of who is accountable when an autonomous agent acts is becoming a live one for finance, not a hypothetical. It echoes anxieties being raised well beyond the trading floor. The challenge of governing AI agents that act with minimal oversight has produced a wave of work on how to give them verifiable identities and control, precisely so their actions can be traced and constrained. Breeden's warning is the financial-stability version of the same problem: an agent that can act faster than a human can supervise is useful right up until the moment it is dangerous. There is a tension at the heart of the issue that Breeden's framing acknowledges. The same agents that could amplify a crisis are being adopted because they make markets more efficient, executing faster and cheaper than people can. Regulators are not trying to ban them; they are trying to work out how to keep their benefits without inheriting a system that can unravel at machine speed. That is a harder problem than prohibition, and it is the one the Bank is signalling it intends to take on. Breeden did not propose specific rules, and her remarks were a warning and a prompt rather than a policy. What they establish is that the prospect of correlated AI agents destabilising markets has moved from the seminar room to the speeches of the people who would have to manage the fallout. The Bank has put the question on the table. The answer, including whether the current framework can be stretched to fit or needs rebuilding, is the work that now follows.

Put a 'kill switch' in AI traders to stop meltdown, says Bank of England

Companies using artificial intelligence systems for autonomous trading could be required to install a "kill switch" to avoid mayhem in markets if they go wrong, a senior Bank of England official has said. In a sign that regulators are becoming uneasy about their current hands-off approach to AI, BoE deputy governor Sarah Breeden said it was examining "whether guardrails are needed" for the technology's use in autonomous trading in financial markets. "AI is reshaping finance at speed," Breeden told the European Central Bank's annual conference in Sintra, Portugal. "It's on us to ensure that the next technology surprise does not become a test of financial stability." AI-powered trading could make markets more volatile in periods of stress, Breeden said, because of an increase in "herding behaviour" as autonomous agents "respond similarly to the same prompts or triggers". The BoE was working with Germany's Bundesbank and the Basel-based Bank for International Settlements to examine this herding problem, she said. They were exploring "mitigants" -- including whether AI systems could be given public policy objectives and "whether guardrails are needed, analogous to circuit breakers or kill switches that would limit or stop trading marketwide if faulty AI models cause market meltdown". However, IMF director for monetary and capital markets Tobias Adrian warned the conference: "Kill switches and circuit breakers may not work that well in private markets and in less liquid and over-the-counter markets." Itay Goldstein, a professor at the University of Pennsylvania, argued that AI-based trading activity posed "quite serious challenges" for law enforcement agencies. "When regulators are trying to prevent market collusion in a world with humans, the idea was always to look for signs of communication, co-ordination [and] intention," he told the conference. "With AI you will not find any of this," said Goldstein, arguing that AI trading agents "just learn how to do it" but do not communicate with each other. He pointed to experimental research showing that AI-based trading agents over time "tend to find ways to achieve a collusive outcome" and limit aggressive competition to maximise long-term profits. Comparing AI models to mischievous teenagers, Breeden said: "They lie, they tell you they've not done things when they have and they behave differently when you're watching them." Regulators would need to identify a human who is "accountable for that model", she added. While trading firms were still mostly using autonomous AI models for "lower-risk operational tasks" such as research, Breeden said, "that could change quickly". "The financial system is likely to evolve into one that operates more autonomously, at scale and speed," she said. "The transition is uncertain and will bring risks of its own to monitor." While algorithmic trading has existed for many years, Breeden's comments indicate that regulators are growing more concerned about the potential for the latest AI models to create a new wave of computer-driven activity in financial markets. Regulators have been reluctant to write specific rules for AI in financial services, saying any regulation would soon be out of date as the technology is moving so fast and they fear stifling innovation in a critical area for economic growth. But Breeden said the growing use of AI to power trading and other areas of financial services such as retail payments raised questions about this approach. Once AI-powered payment agents could book a holiday, refill a fridge or refresh a wardrobe, Breeden said, "the biggest issues are likely to be for regulation and industry standards". She said rules may need adapting for "how users give consent and authorisation to agents", as well as for multiple transactions, dispute resolution, fraud and protocols for interacting with merchants and financial institutions. "What these two examples -- agentic commerce and agentic trading -- both highlight is that, as AI capabilities increase, we must keep asking whether existing, technology-agnostic regulatory frameworks remain sufficient," she said.

Boost City regulator's powers to help protect UK consumers from AI, says watchdog

FCA's review into how tech will reshape financial services warns about amplified risks of cyber-crime and fraud Ministers have been urged to toughen the City regulator's powers to protect consumers against the potential risks of AI, according to a landmark review. The Financial Conduct Authority's (FCA) Mills review, which looked at how AI will reshape financial services from 2030 onward, found that companies are already starting to shift from human-led activities towards AI-enabled services for everyday consumers. While it found that the move could actually support customers, and make financial advice more accessible to lower-income households, it also ramped up the risk of fraud, cyber threats and harm to consumers. "AI is likely to become a defining force in retail financial services, transforming how firms operate, how consumers make financial decisions and how markets function," the FCA said. "While AI has the potential to improve access, personalisation and efficiency, it could also amplify risks associated with fraud, cybersecurity, consumer harm and market concentration." The report, which was led by one of the FCA's executive directors, Sheldon Mills, made a series of recommendations, including having the FCA adopt its own AI-enabled model to supervise firms, and asking the government to "boost the FCA's existing powers". That could mean expanding its powers over "critical third parties", such as AI firms and cloud providers and giving the FCA "direct powers" to regulate tech companies to prevent digital monopolies, boost competition and protect consumers. In an interview, Mills told the Financial Times that regulators needed to embrace AI internally to keep up with the "speed, pace and scale of change" as well as "monitor, detect and tackle the risks". "It is an arms race," Mills added. Mills said in a statement: "Artificial intelligence will transform financial services by 2030. It creates significant opportunities for consumers, firms and the wider economy. This report sets out a roadmap for how industry regulators and government can prepare for the next phase of AI-driven change in our world-leading financial services sector." The review was first announced in January this year, as part of efforts to understand how AI could evolve in the future, how those developments could affect consumers, markets and firms, and how financial regulators may need to evolve in response. The FCA found that a fifth of people across the UK, equivalent to 11 million people - are open to using AI to make their financial decisions, including on savings and borrowing. That is despite the fact that AI models are not scrutinised by financial regulators and that consumers will not be compensated if they lose money. Mills' report recommends that the FCA launch another review within the next six months, looking at the potential harm facing consumers who are using AI to manage their personal finances. He also said that the review should look at the risk posed by companies providing unregulated financial services with the help of AI technologies, given that their everyday operations tend to fall outside the regulator's responsibilities and remit. The review has been taking place amid a growing debate over the handling of a powerful AI model developed by US tech firm Anthropic. Anthropic said the model, known as Mythos, was a serious potential threat to any organisation's cybersecurity and started metering out its use to vetted firms, which included some UK banks. There have been fears that having Mythos fall into the wrong hands could wreak havoc on banks and potentially put the wider financial system at risk. Use of Mythos by US firms was halted last month by Donald Trump's administration, before being partially restored last week. The FCA will now deliberate on how to respond to the Mills Review's recommendations.

UK FCA Publishes Review of AI Impact on Retail Financial Services

The FCA's vision for agentic AI points toward a financial system where programmable money and tokenized assets could play a much larger role. The United Kingdom's Financial Conduct Authority (FCA) has issued a broad regulatory blueprint for retail financial services, warning that retail financial services are hurtling toward total automation driven by autonomous "agentic AI." The landmark report, "AI and the future of retail financial services," spearheaded by executive director Sheldon Mills, details a structural shift away from periodic, human-led decisions toward continuous, automated financial services that could increasingly rely on programmable financial infrastructure. "The central shift is from human-led, episodic financial activity towards services that are AI-enabled, continuous and delegated," Mills wrote. In January, the FCA launched a review into the implications of advanced AI on consumers, retail financial markets and regulators. The 147-page report comes at an inflection point where generative AI meets institutional crypto adoption. As financial systems transition to autonomous portfolio and cash management, legacy fiat banking rails are seen as structurally incapable of matching machine transaction speeds. This positions systemic stablecoins and tokenized bank deposits as potential settlement infrastructure for AI-driven financial services. It outlines seven recommendations for the FCA to consider, including enabling "the foundations for agentic finance," which would support the development of trusted agent protocols that would underpin use of agentic AI and "scaling up the FCA's AI Lab to support AI models and system innovation in financial services." FCA envisions agents on "autonomy spectrum" The Mills Report suggests that the catalyst is the rapid evolution of AI from predictive models into independent agents operating on an "autonomy spectrum." At the far end of this spectrum, humans act as mere "observers" while AI continuously manages capital. Screenshot of table header that sets out how FCA sees operator activities may change as they move across the AI autonomy spectrum. Source: Financial Conduct Authority. The acceleration of this shift has outpaced prior regulatory timelines, with more than 20 frontier models released since late 2025 alone. "Firms are moving from systems that recommend actions to systems empowered and trained to take them, and consumers will soon gain agents that act on their behalf," Mills said in the report's foreword. FCA research shows that 20% of UK adults are already open to letting AI make autonomous financial choices. For these AI agents to execute multi-layered transaction strategies seamlessly, they require programmable, instantaneous settlement mechanisms. Traditional multi-day settlement latency remains an operational bottleneck. Because systemic stablecoins and tokenized assets live natively on programmable ledger networks, they provide the friction-free, atomic settlement needed for automated protocols to move capital instantly without human clearance. However, this automation introduces severe corporate governance risks regarding legal accountability. The review highlights growing industry anxiety over this ambiguity, noting that one CEO observed that the financial sector may eventually require a "Turing test" to accurately distinguish between human intent and autonomous algorithmic behavior in the market. "The FCA's Mills Review reinforces that firms should treat agentic AI as an accountability and governance issue now, while providing greater confidence to innovate responsibly as AI adoption accelerates," Emma Banymandhub, CEO of The Payments Association, said in a statement. "AI has enormous potential for financial services, but realising that potential will depend on strong governance, clear accountability and maintaining consumer trust." Mills, who is leaving after eight years at the FCA, told The Financial Times ahead of the report's release that managers would still need to be accountable for the actions of their AI models. "You need a human on the hook for what they're doing," he said.

Europe Warns AI Threatens Financial Stability

"We need to think about new tools and a different way of working with the [AI] market in a more collaborative way," says Nikhil Rathi, CEO of the UK's finance watchdog. European regulators and central bankers have warned that rulemaking cannot keep pace with rapid advances in agentic artificial intelligence and have called for guardrails to protect the financial system. Bank of England deputy governor Sarah Breeden is one of several central bankers who have said that agentic AI could amplify volatility during bouts of market stress. Breeden questioned if guardrails are needed, "analogous to circuit breakers or kill switches that would limit or stop trading market-wide if faulty AI models cause market meltdown," she said at the European Central Bank's annual meeting in Sintra, Portugal, on Tuesday. US companies are leading in AI investment and frontier model development, and Europe's financial system gives it fewer capital channels into AI compared to the US equity markets. Regulating too cautiously could widen that gap further, as AI companies may seek out jurisdictions with lower compliance requirements. Cybersecurity and financial risk warnings European Central Bank President Christine Lagarde, in an interview with French outlet Les Echos on Thursday, warned that AI technology poses a "major risk." "For about a decade now, we have been talking about cybersecurity risks, hacking, data theft, and so on," Lagarde said. "But with the acceleration and deepening of AI models, we are confronted with a much more serious risk, because it is happening very, very quickly, and because the means of defense -- and the funding required for them -- have yet to be found." Meanwhile, Nikhil Rathi, CEO of the UK's Financial Conduct Authority, told CNBC's Squawk Box on Thursday that traditional regulation cycles don't work in an era of fast-moving AI development. "Technology moves incredibly fast, and we need to think differently about some of the innovations that we are seeing on AI," Rathi said. "The reality is some of these technologies now move in weeks or months, and the traditional cycle of rulemaking simply doesn't work in that way, so we need to think about new tools and a different way of working with the market in a more collaborative way." Central bankers, especially in Europe, have raised the same red flags about crypto, claiming that it could disrupt the traditional financial system. Bankers warn of AI boom-bust risk The Bank for International Settlements warned on June 28 that AI "exuberance" could have major financial consequences. If central banks tighten policy to contain inflation, this could precipitate a "sharp pullback in [AI] asset prices after a prolonged period of exuberant risk-taking," which could trigger "disruptive macro-financial feedback loops," the BIS said. Breeden said that debt financing was rising rapidly. "We therefore judged that the financial stability consequences of any fall in AI-related asset prices could well increase," she said. Meanwhile, Tobias Adrian, Director of the IMF's Monetary and Capital Markets Department, said in an interview with Bloomberg on June 30 that there is a "potential maturity mismatch in between the duration of the physical assets and the duration of the debt."

FCA's AI review points to Regulatory Intelligence as next competitive advantage: By Rohini Gupta

Today's Mills Review on AI in retail financial services reveals that the industry's primary challenge is not AI deployment, but the transformation of Regulatory Intelligence. While the eagerly anticipated review from UK Financial Conduct Authority (FCA) addresses the immediate impact of AI on fraud, advice, and supervision, its most critical insight is, arguably, that regulatory intelligence will become the essential infrastructure for the sector. As AI becomes embedded in every aspect of financial services, the ability to ensure innovation is explainable and sustainable is what will ultimately separate market leaders from the rest. The FCA's report paints a compelling picture for the next decade. It envisages a market in which AI is increasingly woven into the customer journey, helping consumers compare products, receive personalised guidance and, over time, delegate more financial decisions to intelligent agents. It explores the potential for AI to narrow the advice gap, improve financial inclusion and create more responsive financial services while recognising that these opportunities bring equally significant responsibilities. Those responsibilities are clearly substantial. And the review highlights familiar but important concerns around governance, transparency, explainability, cyber resilience, operational resilience and consumer protection. It also explores risks that are likely to become increasingly significant as AI matures, including concentration risk arising from dependence on a relatively small number of AI and cloud providers, the growing sophistication of fraud and deepfakes and the challenges of ensuring accountability where increasingly autonomous systems influence or make financial decisions. These are all essential issues for firms and regulators alike. Yet taken together, they point towards a broader structural shift. For decades, regulation has largely been interpreted and implemented through human processes. New rules are published. Legal and compliance teams interpret them. Policies are updated and controls are amended. Monitoring follows and evidence is assembled for supervisors. Technology has no doubt improved efficiency, but the underlying operating model has remained remarkably consistent. The future described by the FCA, however, is fundamentally different. AI systems do not work periodically. They operate and learn continuously, increasingly supporting or automating decisions continuously. Regulation, meanwhile, continues to evolve at an accelerating pace. Consumer expectations continue to shift and supervisory expectations continue to develop. The logical conclusion is that regulatory operations cannot remain static while the rest of the financial services ecosystem becomes dynamic. Regulatory Intelligence: The Future This is why, at FinregE, we believe the next strategic challenge is not AI alone. It is regulatory intelligence. AI is only ever as reliable as the information upon which it depends. In financial services, that information extends far beyond customer data or internal knowledge. Every significant decision exists within a framework of regulatory obligations. Whether assessing affordability, communicating with customers, managing financial crime risk, launching products or meeting Consumer Duty expectations, AI must operate within an accurate and continually evolving regulatory context. Without that context, even the most sophisticated AI models risk making decisions that are technically impressive but regulatorily flawed. The FCA's discussion of agentic AI illustrates this challenge particularly well. As AI evolves from supporting employees to taking increasingly autonomous actions on behalf of firms or consumers, governance inevitably becomes more complex. Accountability cannot stop at understanding how an algorithm functions. Organisations must also understand the regulatory basis upon which AI reaches its conclusions. Every recommendation generated by an AI assistant, every automated control, every customer interaction and every delegated financial decision should ultimately be traceable to trusted regulatory obligations. Explainability is not simply about understanding the model. It is about understanding the regulatory intelligence that informed the outcome. The report also raises important questions about the future structure of financial markets. If increasing numbers of firms rely upon the same foundation models, cloud providers and technology platforms, genuine competitive differentiation becomes harder to sustain. Access to advanced AI capabilities will, over time, become less distinctive. What will be considerably harder to replicate is trusted regulatory intelligence. The institutions that succeed will be those capable of transforming complex regulation into structured, authoritative and continuously updated intelligence that can be consumed consistently by people and machines alike. That capability will underpin governance, strengthen resilience and enable firms to innovate with greater confidence precisely because they can demonstrate that AI is operating within clear regulatory parameters. Another observation within the FCA's review deserves particular attention. The report recognises that regulators themselves are increasingly exploring the use of AI to enhance supervision, improve analysis and identify emerging risks. This is a natural evolution. As financial markets become more complex and data volumes continue to grow, supervisory approaches must evolve alongside them. The implication for industry is profound. An AI-enabled regulator will increasingly expect AI-enabled regulatory operations. Static policy libraries, disconnected spreadsheets and fragmented compliance processes were designed for an era in which regulation changed relatively slowly and was interpreted almost exclusively by people. They are unlikely to prove sufficient in a world where regulatory change is continuous, supervisory capability is increasingly digital and firms themselves are relying on AI to support core business processes. A New Operating Model What emerges instead is the need for a different operating model. One built upon continuously updated regulatory intelligence, digital rulebooks, machine-readable obligations, transparent governance and the ability to assess the impact of regulatory change as it happens rather than weeks or months later. This is not simply an incremental improvement in compliance. It represents a shift in how financial institutions will operate. The FCA's review rightly focuses on ensuring that AI delivers better outcomes for consumers while maintaining trust in financial markets. FinregE wholeheartedly shares that ambition. But trust in AI will not be achieved through governance frameworks alone. It will depend upon confidence that every AI-enabled decision rests on trusted, current and explainable regulatory intelligence. That is why we believe the conversation is now entering its next phase. Artificial intelligence will continue to evolve rapidly. Models will become more capable, agents will become more autonomous and adoption will become more widespread. The institutions that lead this transformation, however, will not necessarily be those deploying the greatest quantity of AI. They will be those that invest equally in the quality of the regulatory intelligence that guides it. The FCA has started an important conversation about the future of AI in financial services. The next conversation should focus on the regulatory foundations that will allow that future to be realised with confidence. Because in the AI era, competitive advantage will belong not simply to firms with smarter algorithms, but to those with smarter regulatory intelligence.

Global Market: UK regulator urged to consider rules for AI chatbots in financial advice

A UK regulatory review has recommended that the Financial Conduct Authority consider bringing AI models such as ChatGPT, Claude and Gemini within its regulatory framework as their influence on consumer financial decisions grows. The report also warned of systemic risks from increasing reliance on a handful of AI and cloud providers. Britain's financial regulator has been urged to consider bringing large language models such as ChatGPT, Claude and Gemini within its regulatory framework as their influence over consumer financial decisions continues to grow, according to a review published on Monday and reported by Reuters. The independent review, commissioned by the Financial Conduct Authority (FCA), was led by the regulator's Executive Director, Sheldon Mills. The report recommends that the FCA assess over the next three to six months whether the regulatory perimeter should be expanded to cover AI models that increasingly shape financial decisions despite operating outside existing financial services rules. US MarketsPowered By As on 07 Jul 2026, 01:30 AM IST S&P 500 Top Gainers Arista Networks173.28(8.31%) Western Digital577.46(7.14%) Tesla419.77(6.69%) Advanced Micro Devices552.05(6.61%) Gainers" S&P 500 Top Losers Solstice Advanced Mat68.05(-15.14%) Coterra Energy32.56(-8.62%) O'Reilly Automotive84.24(-6.66%) AutoZone2,958(-6.38%) Losers" The review found that more than a quarter of UK consumers trust AI tools, including OpenAI's ChatGPT, Anthropic's Claude and Google's Gemini, for financial guidance. However, Reuters reported that many users remain unaware that the consumer protections applicable to regulated financial advice do not extend to these AI services. While financial advice in Britain can only be provided by authorised firms, the review cautioned that increasingly personalised recommendations generated by AI chatbots could blur the distinction between general guidance and regulated financial advice. It warned that continuous and adaptive recommendations may begin to resemble services that fall within the scope of financial regulation. The report also highlighted broader risks arising from the financial sector's growing dependence on a small group of technology providers. Reuters reported that common reliance on the same AI models, cloud infrastructure and technology platforms could create systemic vulnerabilities, including correlated behaviour, concentration risk and common points of failure across financial markets. The review noted that while AI adoption in financial services remains concentrated in lower-risk back-office operations, firms are increasingly deploying the technology in customer-facing functions such as complaint handling and investment guidance. A recent survey cited in the review found that 81% of financial firms globally have adopted AI to some extent, with 40% using the technology in more advanced applications. The FCA said the review represents the first comprehensive assessment by a financial regulator of AI's impact on the financial services sector, Reuters reported. However, the watchdog is not obligated to implement the recommendations. The report comes as regulators worldwide intensify scrutiny of AI-related risks, including cyber threats, operational resilience and the emergence of increasingly autonomous AI systems. Bank of England Deputy Governor Sarah Breeden recently signalled the potential need for dedicated AI regulation to address financial stability risks posed by advanced agentic AI systems. (Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times.)

FCA publishes landmark review into impact of AI on retail financial services

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community. Led by FCA executive director Sheldon Mills and commissioned by the board, The Mills Review is the first work of its kind initiated by a regulator globally. Drawing on views from across the financial services landscape, the report identifies four major AI‑driven shifts likely to impact retail financial services: the transformation of firm operations; the evolution of consumer journeys; the reshaping of competition and market power; and the amplification of fraud and cyber risks. The report finds there is already consumer appetite for the use of agentic AI in personal finance, with research commissioned by the FCA showing that a fifth of people - equivalent to 11 million UK adults - are likely to use AI that can act autonomously within pre-set goals. But consumers in the survey are concerned about trust and control of AI. The Review concludes that AI is likely to become a defining force in retail financial services, transforming how firms operate, how consumers make financial decisions and how markets function. While AI has the potential to improve access, personalisation and efficiency, it could also amplify risks associated with fraud, cyber security, consumer harm and market concentration. Says Mills: "Artificial intelligence will transform financial services by 2030. It creates significant opportunities for consumers, firms and the wider economy. This report sets out a roadmap for how industry regulators and government can prepare for the next phase of AI-driven change in our world-leading financial services sector." The Mills Review also outlines seven recommendations for the FCA board and executive to consider: * Secure and adapt the regulatory perimeter. * Strengthen system-wide coordination and oversight. * Monitor the transition to autonomous models and adapt regulatory frameworks. * Scale up the FCA's AI Lab to support AI models and system innovation in financial services. * Enable the foundations for agentic finance. * Build and adopt an AI-enabled agentic supervisory model. * Develop a trusted public-interest AI-enabled financial capability service. Ashley Alder, Chair of the FCA, says: "As is clear in the report, we need to keep pace with a rapidly changing environment and the principles-based, outcomes focussed approach we've taken on AI - relying on the Consumer Duty and Senior Managers Regime - has been critical to us doing so. The recommendations build on work the FCA has been doing - not least allowing firms to test their use of AI with us - and our own use of AI to be a smarter regulator, more efficient and effective."

Bank of England's Breeden signals new rules to govern agentic AI

Following years of insistence that existing frameworks were sufficient to mitigate AI risks, Deputy Governor Sarah Breeden said rapid developments in areas like agentic payments and trading had exposed potential gaps that could require a more sophisticated regulatory response. Agentic AI can make decisions and operate autonomously. The Bank of England on Tuesday signalled the need for bespoke AI regulation to contain risks to the ⁠financial system ⁠posed by increasingly capable agentic systems, in a potential shift in its approach to overseeing the technology. Following years of insistence that existing frameworks were sufficient to mitigate AI risks, Deputy Governor Sarah Breeden said rapid developments in areas like agentic payments and trading had exposed potential gaps that could require a more sophisticated regulatory response. Agentic AI can make decisions and operate autonomously. "Our frameworks were not built to contemplate autonomous agents, and relying ⁠on a human in the loop for all agent actions is unlikely to be realistic," Breeden told the European Central Bank Forum on central banking in Portugal. Enhanced recovery and kill switches Breeden said the BoE is considering whether banks need "enhanced recovery" for core systems, allowing one bank to take over another's basic functions during a disruption. Other measures under consideration include fresh guardrails and circuit breakers or kill switches "that would limit or stop trading market-wide if faulty AI models cause market meltdown." According to a Cambridge Centre for Alternative Finance survey, 52% of finance firms are already using agentic AI. In commerce, agents are typically used to recommend products and in trading, firms mostly use autonomous AI for lower-risk operational tasks, though that could change quickly, Breeden said. "If AI agents respond similarly to the same ⁠prompts or triggers, they could amplify volatility in stress - especially if their objectives drift from original goals or public policy objectives." Regulators and global standard-setting bodies have repeatedly warned about the risks posed by the rollout of AI across the financial sector since Anthropic released Mythos, a model that analysts say could introduce significant cybersecurity challenges to the banking industry. The Financial Stability Board earlier in June called for tighter safeguards to guard against the risks of AI agents, which, it said, posed a distinct challenge to human oversight.

FCA Seeks More AI Regulation as Agents Take Over Finance | PYMNTS.com

"AI will reshape consumer financial journeys, with people increasingly delegating to AI applications that act on their behalf," Sheldon Mills, an executive director for the Financial Conduct Authority (FCA), wrote in a report published Monday (July 6). "Consumer demand is already emerging, suggesting a shift to agent-led journeys is credible," the report added. In time, artificial intelligence (AI) systems will go beyond offering information and recommendations to providing agents that can act on behalf of customers to provide financial management within agreed limits. "If done well, this could help consumers achieve more while doing less, addressing long-standing problems such as low switching, advice and protection gaps, and improving outcomes for people with lower financial capability," the report says. "There are both benefits and risks - for example, hyper-personalization could help better match products to needs, but also enable bias, opaque pricing and personalized manipulation." In an interview with the Financial Times (FT) ahead of the report, Mills said the FCA would need greater authority to keep up with AI's rapid evolution, and called on the British government to examine whether the use of large language models like ChatGPT or Claude should be subject to their rules. He added that financial regulators would also have to adopt AI themselves to meet the "speed, pace and scale of change" the technology is bringing to the industry and to help "monitor, detect and tackle the risks." "It is an arms race," Mills told the FT. In related news, PYMNTS spoke Monday with Maik Taro Wehmeyer, co-founder and CEO at Taktile, who argued that 2026 "is the year where AI will come to financial services." He told PYMNTS CEO Karen Webster that while many banks remain hesitant, a growing group has movedtoward an "agentic-first" future. With AI solutions, Wehmeyer said, small business loans that once needed weeks of manual underwriting could potentially be OK'd in minutes, while insurance claims that had taken months could be evaluated in hours with drone imagery and AI-powered damage assessments. "I think many people by now confuse AI transformation with cost savings," Wehmeyer said, adding that the competitive advantage actually comes from AI's ability to drastically reduce decision times. "If I'm a small business owner and I'm asking for a loan, and I get the answer not within 14 days ... but within five minutes, how great is that?" he said.

BoE calls for bespoke AI regulation

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community. In a speech at a central banking event in Portugal, deputy governor Sarah Breeden spoke of potential gaps in supervision that have arisen from technology developments and specifically agentic AI when used for payments and trading. "Our frameworks were not built to contemplate autonomous ⁠agents, and relying on a human in the loop for all agent actions is unlikely to be realistic," said Breeden. It is not just the use of agentic AI that is of concern but also the prospect or more severe and more frequent cyber attacks. "We need policy frameworks, internal skills and institutional structures ready for more frequent technology surprises. Cyber risks, agentic trading and agentic payments and commerce are the applications on my radar today. But that list could look different in a year, if not sooner," added Breeden. Her proposals include greater use of scenario analysis and using AI to boost monitoring and risk management, including the creation of digital twins to simulate interactions between banks. Breeden also said that the BoE is considering the use of "enhanced recovery" for core systems in which one bank can take over another's processes during a disruption. In addition, Breeden also referfenced the potential use of kill switches and circuit breakers "that would limit or stop trading market-wide if faulty AI models cause market meltdown". The deputy governor's speech comes days after the Financial Stability Board called for more stringent safeguards for the use of AI agents.

Bank of England's Breeden signals new rules to govern agentic AI

LONDON, June 30 (Reuters) - The Bank of England on Tuesday signalled the need for bespoke AI regulation to contain risks to the financial system posed by increasingly capable agentic systems, in a potential shift in its approach to overseeing the technology. Following years of insistence that existing frameworks were sufficient to mitigate AI risks, Deputy Governor Sarah Breeden said rapid developments in areas like agentic payments and trading had exposed potential gaps that could require a more sophisticated regulatory response. Agentic AI can make decisions and operate autonomously. "Our frameworks were not built to contemplate autonomous agents, and relying on a human in the loop for all agent actions is unlikely to be realistic," Breeden told the European Central Bank Forum on central banking in Portugal. ENHANCED RECOVERY AND KILL SWITCHES Breeden said the BoE is considering whether banks need "enhanced recovery" for core systems, allowing one bank to take over another's basic functions during a disruption. Other measures under consideration include fresh guardrails and circuit breakers or kill switches "that would limit or stop trading market-wide if faulty AI models cause market meltdown." According to a Cambridge Centre for Alternative Finance survey, 52% of finance firms are already using agentic AI. In commerce, agents are typically used to recommend products and in trading, firms mostly use autonomous AI for lower-risk operational tasks, though that could change quickly, Breeden said. "If AI agents respond similarly to the same prompts or triggers, they could amplify volatility in stress - especially if their objectives drift from original goals or public policy objectives." Regulators and global standard-setting bodies have repeatedly warned about the risks posed by the rollout of AI across the financial sector since Anthropic released Mythos, a model that analysts say could introduce significant cybersecurity challenges to the banking industry. The Financial Stability Board earlier in June called for tighter safeguards to guard against the risks of AI agents, which, it said, posed a distinct challenge to human oversight. (Reporting by Phoebe Seers; Editing by Barbara Lewis and Tommy Reggiori Wilkes)