ECB, European Regulators Warn AI Risks Are Outpacing Oversight

European central bankers and financial regulators are warning that agentic artificial intelligence could threaten the financial system and are calling for new safeguards.

Cointelegraph reported on July 6 that Bank of England Deputy Governor Sarah Breeden told the European Central Bank's annual conference in Sintra, Portugal, that officials should consider safeguards such as circuit breakers or kill switches that could limit or halt trading if failures in AI models trigger a market crash. She also said agentic AI could amplify volatility during periods of market stress.

European Central Bank President Christine Lagarde also described AI as a "significant risk." In an interview with French newspaper Les Echos, she said policymakers had spent the past decade discussing cybersecurity risks but now face a far more serious threat as AI models accelerate and grow more sophisticated. The shift is happening very quickly, while defenses and the funding needed to support them are still not in place.

Nikhil Rathi, chief executive officer of the U.K. Financial Conduct Authority, told CNBC that technology is moving at an incredibly fast pace, with some tools changing within weeks or months. Traditional legislative and regulatory cycles cannot keep up with that speed, he said, adding that regulators need to find new approaches that work more collaboratively with the market.

The Bank for International Settlements warned on June 28 that overheating in AI could have serious consequences for the financial system. It said AI-related asset prices could correct sharply after a prolonged period of excessive risk-taking if central banks tighten policy to curb inflation, potentially setting off spillover shocks across the broader macroeconomy and financial system.

Tobias Adrian, director of the International Monetary Fund's Monetary and Capital Markets Department, told Bloomberg on June 30 that there is a potential mismatch between the maturity of AI-related physical assets and the maturity of the debt used to finance them.