As financial institutions increasingly rely on artificial intelligence in critical functions such as credit assessments, a group of UK lawmakers has expressed concern about the industry’s preparedness for significant AI-related incidents.
The lawmakers have urged the Financial Conduct Authority and the Bank of England to establish
AI-focused stress tests
that could assist financial services firms in managing potential issues arising from these technologies.
Additionally, the committee has called for a more proactive approach from the UK to address these risks. They recommended that the FCA issue guidance on how consumer protection rules apply to AI and the extent of senior financial services managers’ understanding of AI components within their systems.
Flaws and Risks
The report underscores the growing necessity for these measures due to the significant risks associated with AI. Flaws in this nascent technology could result in inaccurate credit decisions, increased fraud risk, and the spread of misinformation.
Furthermore, the concentration risks posed by major AI models, predominantly facilitated by leading U.S.-based tech giants, are highlighted. These centralized systems have the potential to
distort consumer decision-making
and drive herd behavior in financial markets.
UK lawmakers also noted that the rise of agentic AI—and the push towards adopting agentic commerce—has created a pivotal moment for financial institutions. This view was echoed by Experian, which warned that merchants and financial institutions currently lack the tools to distinguish between legitimate AI agents and malicious bots.
The Current Conundrum
Despite these concerns, the benefits of AI remain a key focus for many financial institutions. According to data from FIS, over three-quarters of business and technology leaders believe that AI has enhanced their organization’s fraud detection and risk management capabilities. Approximately half of respondents also indicated plans to
increase
AI investments in the next two years.
At the same time, a Bank of England official recently stressed that the UK financial industry is not fully leveraging data analytics for fraud detection. This highlights the central challenge faced by many financial institutions: they must develop strategies to harness AI’s benefits while mitigating its inherent risks.