Artificial intelligence is developing too quickly for lawmakers and regulators to keep up, according to Financial Conduct Authority (FCA) chief executive Nikhil Rathi.
Speaking at techUK’s Agents of Change: Generative and Agentic AI in Financial Services 2026 conference, Rathi said traditional regulation must adapt to handle the new technology.
“Technology is moving much faster than many regulatory paradigms. Legislation will never keep up,” he said.
His comments come as AI adoption surges across the financial sector. More than 80% of financial services firms are already using the technology, according to industry studies quoted by Rathi.
Rathi said financial services will play a key role in the UK’s ambition to become a global AI leader. The sector provides the investment, infrastructure and trust needed to help AI spread across the wider economy, he said.
But he warned that AI is challenging many of the assumptions on which markets and regulation were built.
“The question isn’t simply how we regulate for AI,” he said. “It’s how do we preserve trust, competition and resilience when technology is moving markets dramatically faster than the frameworks governing them?”
The FCA is changing how it approaches regulation as a result. Rathi said the watchdog is placing more emphasis on competition, collaboration and understanding risks across the financial system.
He said the regulator is rethinking how it supervises firms, gathers intelligence and supports innovation.
In some areas, detailed rules will still be needed. In others, traditional rule-making may no longer work, he said.
Instead, regulators will need to act more as stewards of the financial system, helping guide markets through rapid change.
The FCA is also using AI itself. Rathi said the regulator is exploring agentic AI as a “first responder” to help monitor wholesale markets and spot potential market abuse more quickly.
The system would analyse vast amounts of data and work alongside human supervisors.
As AI becomes more widely used, Rathi said regulators must pay close attention to competition and resilience. Greater reliance on the same technologies could create new risks across the financial system.
