European central bankers and financial regulators said artificial intelligence technologies are advancing faster than existing regulatory frameworks, creating new risks for financial markets despite AI’s significant potential to boost productivity across the financial sector.
Officials from the European Central Bank (ECB), the Bank of England, and the U.K.’s Financial Conduct Authority (FCA) called for faster adaptation of regulatory frameworks to the growing adoption of AI systems. They said traditional regulatory development cycles no longer match the pace of technological progress, particularly as agentic AI models become capable of autonomously executing complex sequences of tasks.
Christine Lagarde, President of the ECB, said AI technologies remain a key driver of productivity growth but also pose a serious risk to the financial system. She said regulators previously focused on cybersecurity threats and data breaches, but the rapid advancement of modern AI models created far greater challenges while effective safeguards have yet to be established.
The issue also became one of the main topics at the ECB’s annual forum in Portugal, where representatives of European financial institutions discussed AI’s impact on market resilience. Sarah Breeden, Deputy Governor of the Bank of England, warned that widespread adoption of AI agents in trading could amplify volatility during periods of market stress. She said such systems are currently used primarily for research and operational support, but that could change quickly.
Breeden said financial regulators should consider introducing additional safeguards similar to market-wide circuit breakers or emergency kill switches that could limit or halt trading if AI systems malfunction.
Nikhil Rathi, CEO of the FCA, said today’s technologies evolve in weeks and months rather than years, making the traditional approach to rulemaking ineffective. Instead, regulators should work more closely with the financial industry to develop new frameworks for managing AI-related risks. He stressed that regulators shouldn’t stand in the way of AI adoption but should ensure greater transparency around emerging risks.
At the same time, European policymakers acknowledged the need to accelerate investment in the region’s AI sector. Boris Vujčić, Vice President of the ECB, said Europe must strengthen its own AI capabilities and technological sovereignty. He noted that Europe has successfully adopted new technologies to improve productivity in the past but hasn’t consistently been among the global leaders in developing them.
Autonomous AI agents created a new segment of the digital payments market, processing more than 176 million transactions worth over $73 million during the past year. Analysts project AI agent transaction volume could reach $5 trillion by 2030. Read more about AI technologies in financial services in the opinion column.
