Regulator warns of "arms race" to keep up with AI use in financial services

Regulators in the UK are warning they face an “arms race” as artificial intelligence reshapes how financial services are delivered, particularly for personal decision-making. Sheldon Mills, an executive director at the Financial Conduct Authority (FCA), told the Financial Times that the watchdog may need stronger powers to keep pace with rapid growth in AI, including large language models such as ChatGPT, Claude, and Gemini. Speaking ahead of an FCA-commissioned report due Monday, Mills said regulators should also adopt AI to “monitor, detect, and tackle” risks at the sector’s “speed, pace, and scale.” The report, summarized by the FT, highlights potential hyper-personalization benefits alongside risks like bias, opaque pricing, and “personalized manipulation.” It urges an FCA review in the next three to six months, including risks from firms operating outside its perimeter and potential consumer harm. Research cited by the FT found a fifth of UK adults are open to using AI for financial decisions despite no coverage or compensation.