Senior European and UK financial officials have warned that traditional regulatory processes are struggling to keep pace with the rapid development of agent‑based artificial intelligence (AI), CNBC reported. Policymakers are seeking ways to encourage productive uses of the technology while addressing risks to market integrity and financial stability.
Key remarks from the forum
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Nikhil Rathi, chief executive of the UK Financial Conduct Authority (FCA), said conventional rulemaking is ill suited to follow fast technological change. Rathi argued that the astonishing speed of AI development requires entirely new regulatory approaches to manage innovation in the sector while mitigating risks that authorities may not yet fully understand.
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Christine Lagarde, president of the European Central Bank (ECB), noted that although AI can materially boost productivity and profitability, it also carries significant dangers. Lagarde observed that discussions on cyber‑security risks, hacking and data theft have been ongoing for about a decade, but the development and diffusion of AI models pose a more severe threat. She warned that the process is happening very quickly while the necessary defensive tools and resources are not yet fully developed.
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Sarah Breeden, deputy governor at the Bank of England, warned that agent‑based AI could amplify price volatility during periods of market stress. While trading firms currently mostly use autonomous systems for lower‑risk operational tasks such as analysis, Breeden said this could change rapidly. She proposed embedding protective mechanisms into trading systems — for example, automatic trading pauses or kill switches — capable of limiting or halting trading if malfunctioning models threaten market collapse.
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Boris Vujčić, an ECB vice‑president, emphasized the need for Europe to build its own AI capabilities. He noted that while the continent has demonstrated the ability to use new technologies to raise productivity, it has not always led in breakthrough developments; accordingly, boosting investment and development capacity is important for technological sovereignty.
Why this matters
Regulators share concern that current frameworks and resources are insufficient to assess and manage new AI‑driven risks. Because the technology can rapidly reshape trading behaviour, liquidity and market dynamics, authorities say preventive measures and defensive mechanisms are essential to avoid wide‑ranging market disruption.
At the same time, officials stressed they do not aim to block the technology’s spread: the task is to strike a balance between fostering innovation and protecting the financial system, while increasing Europe’s investment and development capacity in AI.
These topics were central at the European Central Bank’s annual forum in Sintra, Portugal, which is often described as the European counterpart to the Jackson Hole economic policy symposium in the United States.
CNBC provided the reporting for these remarks; the cover image used was illustrative.
