Keeping an eye on AI in financial services: recent regulator messaging on the agentic “step change”

We have just received some important regulatory messaging from both the FCA and the Bank of England. Nothing specifically has just changed. Agents have been around for a while. Both regulators have been consistent in their messaging for some time. Rather, the clarification is strong. And, there is now a regulator-led acknowledgment of the “step change” driven by agentic AI. This has practical, and inescapable, implications of this for every stakeholder in the financial services ecosystem. 

This summary looks at two recent speeches with a focus on the demands that agentic AI creates in relation to the governance of AI by regulated firms in the financial services sector. 

There is so much more packed into the text of these two speeches, particularly in relation to agentic augmented cyber risks, market-wide resilience issues, and AI-driven changes to the forces of competition in the markets. Those topics will be the subject matter of further posts.

Key themes for right now

The following have been key themes for some time and all show up in these two recent speeches:

• collaboration: a key to the success of safe and responsible AI deployment throughout the financial services ecosystem;
• trust: and the fact that the trust of the industry's consumers in AI cannot be assumed, it needs to be gained and maintained;
• rules: traditional laws and rules are now somewhat obsolete because they are static and unable to keep pace with AI;
• architecture: along with the laws and rules, our regulatory architectures may need to evolve, they were not created with agents in mind;
• accountability: human oversight, by the right humans, is critical; and
• competence: the leaders of regulated firms must fully understand the evolving risks.

Protection and innovation

The FCA refers to the concept of “stewardship” (both in this featured speech and in related posts on social media) and they are driving here both at their proactivity in this space and at the responsibility that they shoulder for safe and responsible AI outcomes for the industry as a whole. This includes their willingness to embrace innovation, to act ahead of changes to the law, and to ensure that regulated firms understand the critical role that they play in the bigger picture. This is not new, it is exactly what the FCA have been championing since the launch of their AI LAB and the various associated sandboxes and initiatives, including their Live Testing initiative. However, as part of this approach, the FCA needs all of the other stakeholders in the ecosystem to reciprocate with equal measures of collaboration and, in the FCA's own words, “it expects to be in the room”.

The FCA's speech

In a speech given last week at techUK's “Agents of Change: Generative and Agentic AI in Financial Services 2026” event, the FCA's Chief Executive referred to agentic systems as drivers of a “profound step change”. In his speech he flagged several pointers to clarity on the question of what AI regulation now looks like. 

Much of what he said is quote-worthy. I have drawn out a few of the most notable and thought-provoking statements:

• “…..investors will be wary to delegate important decisions to systems they don't understand. Accountability for regulated activities and outcomes must remain clear. Designed with the right human oversight, and in a way that gives consumers confidence to engage”; 

• “Technology is moving much faster than many regulatory paradigms”; 

• “Legislation will never keep up”;

• “In some areas, we will still need detailed rules. But in others, traditional rule-making simply won’t work anymore”;

• “A growing part of our role will be stewardship, as well as supervision”; 

• “Helping firms and markets navigate technological change, and working more collaboratively and creatively to understand emerging risks”;

• “Even acting before legislation catches up”; and

• “Boards and leadership teams must understand the risks” .

The highlighted sections are worth a re-read. 

Bank of England

In a speech delivered this week, “Agents of Change” at ECB Sintra Forum, the Deputy Governor of the Bank of England, also gave some significant indicators regarding the direction of travel. Much of what she says echoes the words of the FCA from last week. Of particular note from her speech are the following statements:

• “…..it’s on us to ensure that the next technology surprise does not become a test of financial stability…We were surprised this Spring, and we should be prepared for further technology surprises…”;

• “The financial system looks likely….to evolve quickly into one that operates more autonomously, at scale and speed: AI agents transacting on behalf of consumers and merchants; devising and executing trading strategies in financial markets; and identifying and chaining together cyber vulnerabilities”;

• “We are experimenting with ….simulation methods to understand which aspects of agent design could drive herding behaviour. That work can also explore mitigants: whether markets using AI agents are resilient enough; whether agents’ objective functions could incorporate public policy objectives; and whether 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”;

• “…..the biggest issues are likely to be for regulation and industry standards: how users securely give consent and authorisation to agents, especially for multiple transactions; how disputes are settled and liability assigned for erroneous or fraudulent transactions; and how authorities avoid fragmentation and walled gardens as AI firms and payment systems all develop protocols for agents to interact with themselves and merchants”; 

• “…..these two examples – agentic commerce and agentic trading – both highlight….that, as AI capabilities increase, we must keep asking whether existing, technology-agnostic regulatory frameworks remain sufficient. 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”; and

• “The impact of new AI capabilities can spread across borders through common technology dependencies, globally systemic financial institutions and market infrastructure. We shouldn’t wait for a crisis to build the cooperation we need…”.

Again, the highlighted sections are worth a re-read. Key repeat indicators include:

• the need for regulators to keep the adequacy of the regulatory frameworks under review;

• the speed at which agents are likely to deliver changes through the financial services ecosystem; and 

• the need for ecosystem-wide cooperation and collaboration.

It is of note that the Bank of England specifically refers to the possibility of a regulatory framework designed for autonomous agents and the need for kill switches in order to protect the markets from system-wide harm. These important indicators resonate in the title of the FCA's speech “Rethinking regulation for the age of AI” and are going to be critical pieces of the regulatory jigsaw as we move forward.

Coming soon

Next week, on Monday 6 July, we have delivery of the output from The Mills Review. Here is a reminder of what The Mills Review was commissioned to look into. The Bank of England indicates that its Financial Policy Committee will publish its updated assessment on 7 July. The last one was in April.   And, later in the year, we are expecting output from the second cohort of the FCA's Live Testing initiative and an FCA authored good and bad practice report specific to the use of AI in financial services.

We will continue to monitor and update on important developments in this space. You can read more updates like this by subscribing to our monthly financial services regulation update by clicking here, clicking here for our AI blog, and here for our AI newsletter. 

If you would like to discuss how current or future regulations impact what you do with AI, please contact me, Tom Whittaker, or Martin Cook. You can meet our financial services experts here and our AI experts here.

.....with the pace of change brought about by AI challenging many of the assumptions on which our markets and regulation were built, the question isn’t simply how we regulate for AI. It’s how do we preserve trust, competition, and resilience when technology is moving markets dramatically faster than the frameworks governing them?... ....AI lowers barriers to entry and creates opportunities for challengers to establish at speed. We welcome that. Our role is not to protect incumbents, but to ensure competition works as it should – in the interests of consumers and the economy. Some firms may fall behind the pace, while others rapidly rise. A transition that might feel bumpy at times, but we will remain focused on market integrity as things unfold. And as markets move faster, our competition objective and system-wide powers become vastly more important.

https://www.fca.org.uk/news/speeches/rethinking-regulation-age-ai