Consumers and the UK financial system are being exposed to 'serious harm' by the failure of the government and the Bank of England to address risks from artificial intelligence, a parliamentary committee has warned. The Treasury committee criticised ministers and regulators, including the Financial Conduct Authority, for taking a 'wait-and-see' approach to AI use in the financial sector.
More than 75% of City firms now use AI, yet the UK has not developed specific laws or regulations to govern its use. MPs warned that the lack of transparency around AI-powered decisions could disadvantage vulnerable consumers, increase fraud, and lead to the spread of unregulated financial advice. They also flagged risks to financial stability from 'herd behaviour', where AI-led firms make similar decisions during economic shocks, potentially triggering a crisis.
The committee urged regulators to take action, including launching stress tests to assess the City's readiness for AI-driven market shocks. It also called on the FCA to publish practical guidance by the end of the year clarifying how consumer protection rules apply to AI and who would be held accountable for any harm.
The FCA said it had already undertaken extensive work on safe AI use, while the Treasury promised to strike a balance between managing risks and unlocking AI's potential. The Bank of England said it had taken active steps to assess AI-related risks and would consider the committee's recommendations carefully.
