UK Parliament Treasury Select Committee urges tougher AI oversight including Bank of England and FCA stress testing, FCA guidance and government designations under the Critical Third Parties Regime

The UK Parliament’s Treasury Select Committee published a report on artificial intelligence in financial services, warning that the Bank of England, the Financial Conduct Authority and the Treasury’s current wait-and-see approach is not adequately managing the risks of rapidly increasing AI use and could expose consumers and the financial system to serious harm.

Evidence cited in the report suggests more than 75% of UK financial services firms are now using AI, with the highest take-up among insurers and international banks, including for core activities such as insurance claims processing and credit assessments. The Committee recommends AI-specific stress testing by the Bank of England and the FCA to improve readiness for potential AI-driven market shocks, and calls for the FCA to publish practical guidance for firms by end-2026 on how consumer protection rules apply to AI and on who should be accountable for AI-related harm. It also urges the Government to designate critical AI and cloud providers under the Critical Third Parties Regime, noting that no organisations have yet been designated despite the regime being established for more than a year.