Britain Urged to Review Regulation of AI Language Models in Finance Sector
Regulatory Concerns and the Impact of AI in Financial Services
By Phoebe Seers
LONDON, July 6 (Reuters) - Britain should review whether large language models such as ChatGPT, Claude and Gemini should be regulated as general-purpose AI tools as they increasingly influence consumer financial decisions, a senior official said on Monday.
Financial Conduct Authority Executive Director Sheldon Mills also said the existing rulebook will need to evolve as firms' reliance on a handful of tech providers creates potential system-wide risks.
Global Regulatory Challenges
Mills' review of the impact of AI on the financial sector comes as regulators globally contend with the impact of AI, from cyber and operational risks associated with frontier AI models such as Anthropic's Mythos to the challenges posed by the rollout of agentic systems capable of acting with limited human intervention.
Consumer Trust and Awareness
He highlighted the growing use of general-purpose large language models by consumers. The review found that more than a quarter of UK consumers trust tools such as OpenAI's ChatGPT, Anthropic's Claude and Google's Gemini for financial advice, despite limited awareness that the protections applied to regulated financial services do not extend to those services.
OpenAI, Anthropic and Google were not immediately available for comment.
Recommendations for Regulatory Perimeter
Mills recommended that the FCA consider within the next three to six months whether to "secure and adapt" the regulatory perimeter by reviewing the scale, nature and impact of general-purpose models that currently sit outside it.
"We need to keep pace with a rapidly changing environment and the principles-based, outcomes focussed approach we’ve taken on AI", said Ashley Alder, Chair of the FCA.
Concentration Risk in the Financial Sector
Adoption of AI by Financial Firms
A recent survey found that 81% of financial firms globally were adopting AI at some level, with 40% at more advanced stages of scaling or transformation.
While most use cases remain concentrated in lower-risk back-office functions, British firms are increasingly deploying AI in customer-facing roles, including handling complaints and providing investment guidance.
Systemic Risks and Dependence on Technology Providers
Operational Vulnerabilities
Mills' review also warned that widespread adoption of AI by the financial sector could leave firms dependent on a small number of technology providers for critical operational capabilities.
Correlated Behaviour and Common Points of Failure
Shared reliance on the same models, cloud providers or technology infrastructure could create correlated behaviour, herding and common points of failure across the financial system, it said.
(Reporting by Phoebe Seers, Editing by Iain Withers Editing by Louise Heavens)
