Bank of England Tests AI Risks to Financial System Amid Regulatory Pressure
The Bank of England (BoE) has announced it is actively testing risks posed by artificial intelligence to the financial system through scenario analysis and simulations. In a letter to parliament's Treasury Committee, the central bank refuted claims that it was adopting a passive wait-and-see approach. Deputy Governor Sarah Breeden highlighted that testing focuses on potential herding behavior among AI agents that could amplify market selloffs during stress periods. The BoE is also collaborating with international counterparts to understand AI's impact on trading. This announcement follows criticism from the Treasury Committee regarding the government's delay in bringing major AI and cloud firms under the Critical Third Parties Regime. Committee Chair Meg Hillier expressed concern over unused regulatory powers, while Treasury Minister Lucy Rigby indicated initial designations would occur this year. Additionally, BoE Governor Andrew Bailey warned that advanced AI tools, such as Anthropic’s recent releases, could significantly exacerbate cybersecurity vulnerabilities. Although the Financial Policy Committee noted that systemic risks from agentic AI are not yet prevalent, it cautioned that risks could escalate rapidly as adoption increases within the financial sector.
Wire timeline
Bank of England Tests AI Risks to Financial System Amid Regulatory Pressure
The Bank of England (BoE) has announced it is actively testing risks posed by artificial intelligence to the financial system through scenario analysis and simulations. In a letter to parliament's Treasury Committee, the central bank refuted claims that it was adopting a passive wait-and-see approach. Deputy Governor Sarah Breeden highlighted that testing focuses on potential herding behavior among AI agents that could amplify market selloffs during stress periods. The BoE is also collaborating with international counterparts to understand AI's impact on trading. This announcement follows criticism from the Treasury Committee regarding the government's delay in bringing major AI and cloud firms under the Critical Third Parties Regime. Committee Chair Meg Hillier expressed concern over unused regulatory powers, while Treasury Minister Lucy Rigby indicated initial designations would occur this year. Additionally, BoE Governor Andrew Bailey warned that advanced AI tools, such as Anthropic’s recent releases, could significantly exacerbate cybersecurity vulnerabilities. Although the Financial Policy Committee noted that systemic risks from agentic AI are not yet prevalent, it cautioned that risks could escalate rapidly as adoption increases within the financial sector.
Latest News