The Treasury Committee has recommended that the Financial Conduct Authority and the Bank of England should start running AI-specific stress tests to help firms prepare for market shocks triggered by automated systems. Evidence received by the committee indicates more than 75% of UK financial services firms are now using AI. Committee chair Meg Hillier stated that, based on the evidence, she does not feel confident that the UK financial system is prepared if there were a major AI-related incident.
The Treasury Committee also recommended that the FCA should publish practical guidance on AI for firms by the end of this year, including how consumer protection rules apply to their use of AI as well as setting out a clearer explanation of who in those organisations should be accountable for harm caused through AI. Experts contributing to the report highlighted threats to financial stability, pointing to the reliance on a small group of U.S. tech giants for AI and cloud services, whilst some noted that AI-driven trading systems may amplify herding behaviour in markets, risking a financial crisis in a worst-case scenario.
The committee's call for AI-specific stress tests reflects growing concerns about systemic risks as financial institutions increasingly rely on automated systems for critical decision-making processes. AI is being used by businesses in a variety of ways, including to automate admin functions and to deliver core services such as processing insurance claims and credit assessments. The regulator has previously indicated it does not favour AI-specific rules due to the pace of technological change.
Sources:
1. https://ca.finance.yahoo.com/news/britain-needs-ai-stress-tests-000309350.html
2. https://uk.finance.yahoo.com/news/uk-financial-system-may-not-000100825.html
3. https://sundayguardianlive.com/feature/britain-needs-ai-stress-tests-for-financial-services-lawmakers-say-165357/
