According to Nikhil Rathi, CEO of the Financial Conduct Authority (FCA), artificial intelligence is developing too quickly for lawmakers and regulators to keep up.
Speaking at techUK’s Agents of Change: Generative and Agentic AI in Financial Services 2026 conference, Rathi said traditional regulation must adapt to deal with the new technology.
“Technology is developing much faster than many regulatory paradigms. Legislation will never keep up,” he said.
His comments come as adoption of AI in the financial sector increases. According to industry studies cited by Rathi, more than 80% of financial services firms are already using the technology.
Rathi said financial services will play a key role in Britain’s ambition to become a global AI leader. The sector provides the investment, infrastructure and trust needed to help spread AI across the broader economy, he said.
But he warned against it AI challenges many of the assumptions on which markets and regulations are built.
“The question is not simply how we regulate AI,” he says. “How can we maintain trust, competition and resilience when technology moves markets dramatically faster than the frameworks that govern them?”
As a result, the FCA is changing the way it approaches regulation. Rathi said the watchdog is placing greater emphasis on competition, cooperation and understanding risks across the financial system.
He said the regulator is rethinking the way it oversees companies, collects information and supports innovation.
Detailed rules will still be needed in some areas. In other countries, traditional regulations may no longer work, he says.
Instead, regulators will need to act more as stewards of the financial system and help guide markets through rapid change.
The FCA also uses AI itself. Rathi said the regulator is exploring AI as a “first responder” to help monitor wholesale markets and detect potential market abuse more quickly.
The system would analyze vast amounts of data and collaborate with human supervisors.
As AI becomes more widely used, Rathi says regulators will need to pay close attention to competition and resilience. Greater reliance on the same technologies could create new risks for the entire financial system.