The UK’s top financial authorities have been cautioned that the country’s financial system is vulnerable to a major AI-related shock, after the Treasury, the FCA and the Bank of England were accused of failing to prepare adequately for emerging risks.
According to City AM, the warning came from the Treasury Select Committee, whose MPs argued that regulators are “not doing enough to manage the risks presented by AI”, despite assurances that the existing regulatory framework is sufficient.
During a recent committee hearing, the Financial Conduct Authority’s chief data, information and intelligence officer said the watchdog currently has “enough regulatory bite that we don’t need to write new rules for AI”. However, MPs rejected this view, concluding in their assessment that the “three authorities are exposing consumers and the financial system to potentially serious harm”. Their findings highlight growing concern that supervisory bodies have not kept pace with the rapid evolution of AI adoption across the sector.
Writing in City AM, Dame Meg Hillier, chair of the Treasury Select Committee, reinforced the committee’s position and reiterated the need for stronger oversight. She stressed that complacency could leave both markets and consumers exposed if AI-driven failures or misconduct occur without appropriate safeguards. Her comments align with a broader shift in regulatory focus as policymakers worldwide examine how AI is reshaping financial stability, risk management and operational resilience.
In parallel, the UK financial services industry has accelerated its deployment of AI technology. Banks have developed in-house AI units, integrated machine learning into customer interactions and automated significant portions of back-office operations. The drive towards efficiency, competitiveness and cost reduction has led major institutions to push ahead, even as regulatory clarity remains contested.
NatWest, Lloyds and HSBC now all rank within the top 20 of the Evident AI index – a global measure of AI maturity and integration within banking. Their inclusion reflects the extent to which large incumbents have embraced AI-driven transformation, further underscoring the stakes should systemic risks fail to be managed effectively.
The committee’s findings place renewed pressure on UK authorities to revisit their stance and consider whether stronger safeguards or updated guidance are necessary to avoid systemic vulnerabilities as AI adoption accelerates.
Keep up with all the latest FinTech news here
Copyright © 2026 FinTech Global
