A cross-party group of UK lawmakers has criticised Britain’s financial watchdogs for their approach to artificial intelligence, stating not enough is being done to prevent harm to consumers or market instability. The Treasury Committee’s report on AI in financial services calls for a shift away from the current “wait and see” stance. They are urging the Financial Conduct Authority (FCA) and the Bank of England to implement AI-specific stress tests, preparing firms for potential market shocks from automated systems. The committee believes the financial system isn’t prepared for a major AI-related incident.
The report also pushes the FCA to publish detailed guidance by the end of 2026, clarifying how consumer protection rules apply to AI and outlining senior manager responsibilities in understanding the AI systems they oversee. This comes amid increasing AI adoption within UK financial firms, with approximately three-quarters now utilising the technology in areas like insurance claims processing and credit assessments. The FCA told Reuters late last year that agentic AI, which can make autonomous decisions, introduces new risks for retail customers.
While acknowledging AI’s benefits, the report highlights significant risks, including opaque credit decisions, potential exclusion of vulnerable consumers through algorithmic tailoring, fraud, and the spread of unregulated advice via AI chatbots. Experts contributing to the report also noted potential threats to financial stability, due to the reliance on a small number of U.S. tech giants for AI and cloud services. The FCA has indicated that it does not favour AI-specific rules due to rapid technological advancements.
Furthermore, Britain’s finance ministry has appointed Harriet Rees, CIO of Starling Bank (a digital bank focused on current accounts), and Rohit Dhawan, from Lloyds Banking Group (a major UK financial services provider), as “AI Champions” to guide AI adoption in the financial services sector. These appointments and the report’s recommendations signal a growing urgency to address the challenges and opportunities presented by AI in finance.
