AI outpaces regulation, Europe’s top bankers and regulators warn

According to European policymakers, financial regulation is falling behind with the rapid development of artificial intelligence. They are calling for public support of the technology while focusing on mitigating its risks to market integrity and stability.

CEO of the UK’s Financial Conduct Authority, Nikhil Rathi said the traditional cycle of rulemaking does not work in an era of fast-moving technological change, specifically an agentic AI rapid growth.

In this connection, Rathi said: “ Technology moves incredibly fast, and we need to think differently about some of the innovations that we are seeing on AI.”

Rathi highlighted the global Financial Stability Board efforts on frontier AI alongside the UK’s AI Safety Institute in the UK as part of a comprehensive initiative to help policymakers, regulators and businesses better understand the risks and safely implement the technology.

The expanded use of agentic AI in financial markets may require guardrails analogous to circuit breakers or kill switches that would restrict trading market-wide if faulty AI models trigger a meltdown, according to analysts'.

Notably, top bankers and regulators also underscore that Europe is lagging in AI investment and the development of corporate evolution driving breakthroughs. Rathi said market authorities must strike an optimal balance when managing such rapidly evolving technology.

He further clarified that tech innovation offers intriguing opportunities for the U.K. productivity and growth challenges, it is critical that markets are not exposed to risks that regulators cannot yet fully monitor.

“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, for example, on financial crime and AI risks, to be able to make sure we secure our objective of market integrity,”

“We don’t want to stand in the way of adoption but we need to be transparent about where risks lie,” he continued.