FCA Boss Warns AI is Moving Faster Than The Law

A top U.K. finance watchdog says regulations cannot keep pace with artificial intelligence (AI).

In a speech Wednesday (June 24), Financial Conduct Authority (FCA) CEO Nikhil Rathi said regulation must therefore evolve to meet the demands of AI’s use.

“Technology is moving much faster than many regulatory paradigms,” Rathi said at the Agents of Change: Generative and Agentic AI in Financial Services 2026 conference. “Legislation will never keep up. That is one reason the FCA’s Strategy is built around rebalancing risk. We are re-thinking what it means to be an effective regulator in the age of AI.”

That means exploring agentic AI as a “first responder” to speed how the FCA monitors wholesale markets, and harnessing technology and massive data sets, as well as the regulator’s supervisory judgement, to more quickly react to market abuse.

“In some areas, we will still need detailed rules. But in others, traditional rule-making simply won’t work anymore,” Rathi said. “A growing part of our role will be stewardship, as well as supervision. Helping firms and markets navigate technological change, and working more collaboratively and creatively to understand emerging risks. Even acting before legislation catches up.”

He likened AI to buy now, pay later (BNPL) firms, saying that while it took those companies around six years to come onto the FCA’s “regulatory perimeter,” the authority did not take another six years to react.

Rathis added that the FCA wants to make it easy for financial services companies to safely build and test AI. The coming weeks will see the publication of the Mills Review, explaining how AI could re-shape retail financial services. And the FCA will later this year issue a publication on good and poor AI practice.

In the meantime, the regulator offers its Supercharged Sandbox, which lets companies build and test solutions “using real-world data, compute and systems,” collaborating with tech giants like Nvidia, and eventually Google, Rathi said.

As PYMNTS wrote earlier this week, there are limits to the sandbox. Mudit Gupta, EY’s AI practice leader for Americas financial services consulting told Global Finance that most banking leaders believe agentic AI can move faster if governance were not seen as a constraint.

“But in practice, governance is what makes these systems deployable at scale,” Gupta said.

Gupta added that while synthetic data is often treated as inherently safe, it can still leak sensitive signals through inference and linkage risks. In addition, it can replicate and scale historical biases, embedding them behind a layer of abstraction that makes them more difficult to detect, audit and challenge, he said.