The UK’s financial regulator should consider expanding its oversight to cover advanced artificial intelligence models used in financial services, according to a review commissioned by the Financial Conduct Authority (FCA), as policymakers assess whether existing rules can keep pace with rapidly evolving AI technology.
According to Bloomberg, the review recommends that the FCA evaluate whether large language models developed by companies including OpenAI and Anthropic should fall within the regulator’s remit if they play an increasingly significant role in consumer financial services. The report was led by Sheldon Mills, an executive director at the FCA, and was published on Monday.
The review concludes that the UK’s current activity-based regulatory framework does not require a wholesale overhaul. However, it warns that continued advances in AI capabilities and wider adoption of AI-powered financial products could expose gaps in existing oversight if technology providers increasingly influence regulated financial activities, Bloomberg reported.
Among its recommendations, the report calls for a review of the FCA’s regulatory perimeter and suggests strengthening the regulator’s authority under the UK’s Critical Third Parties regime. Such changes could allow the watchdog to exercise greater oversight of technology providers whose services have become integral to financial markets, including major AI developers and cloud infrastructure companies.
The recommendations reflect growing concern that artificial intelligence is reshaping how financial products are designed, distributed and used. Banks and other financial institutions are increasingly deploying generative AI to support customer service, fraud detection, compliance functions and financial guidance, while consumers are also turning directly to general-purpose AI tools for financial information.
The review also raises broader competition and market structure issues. As financial institutions rely on a relatively small number of AI model developers and cloud computing providers, operational dependencies could become concentrated among a handful of technology companies. That concentration may create systemic risks if disruptions or failures affect widely used platforms, while also potentially shifting market power away from regulated financial institutions toward large technology providers.
Those concerns mirror recommendations made earlier this year by the UK Parliament’s Treasury Committee, which urged the government to designate major AI and cloud providers as Critical Third Parties, arguing that regulators need stronger supervisory tools as digital infrastructure becomes increasingly central to financial stability.
The FCA launched the Mills Review in January to examine how artificial intelligence could transform retail financial services by the end of the decade. The consultation considered AI’s impact on competition, consumer behavior, market structure and the regulatory framework, with the aim of identifying whether financial regulation should evolve alongside technological change.
According to Bloomberg, the FCA will now consider the report’s recommendations, including whether its regulatory responsibilities should be expanded to reflect the growing influence of general-purpose AI systems in financial services. Any changes to the regulator’s statutory powers would require action by the UK government and would form part of broader efforts to balance innovation, consumer protection, financial stability and effective competition as AI adoption accelerates.
Source: Bloomberg
