FCA warns of AI "arms race" in UK finance, demands new powers

The UK's Financial Conduct Authority has warned of an "arms race" to regulate AI in financial services, urging the government to grant it new statutory powers to oversee frontier models including ChatGPT, Claude, and Gemini, the Financial Times reported.

Why it matters

The FCA is signaling that existing oversight frameworks were not built for systems that can autonomously draft advice, screen transactions, or generate trading signals. Without new powers, the regulator argues, gaps will widen between what AI tools do in UK finance and what supervisors can actually examine. The warning lands as both the EU and US push parallel AI oversight regimes, raising the prospect that London could fall behind as a venue for compliant AI-driven financial products.

Market impact

FCA-supervised banks, insurers, and asset managers are already deploying large language models for compliance, customer service, and research workflows. A new supervisory perimeter would likely require model documentation, bias testing, and incident reporting obligations similar to those the EU AI Act imposes on high-risk systems. Vendors targeting UK finance should expect procurement cycles to lengthen as buyers wait for clarity on the regulator's exact remit.