FCA calls for faster regulation of AI to protect market integrity

Financial Conduct Authority (FCA) Chief Executive Nikhil Rathi has called for a faster, more outcomes-focused approach to financial regulation as artificial intelligence (AI) transforms the industry.

Speaking at the Corporation of the City of London’s annual City Dinner at Mansion House on 22 October, Rathi warned that the pace of technological change was increasingly outstripping the ability of traditional regulatory frameworks to respond.

He said the UK risked falling into an ‘innovation delta’, where regulators and accountability mechanisms struggle to keep pace with emerging technologies, potentially undermining both market integrity and economic growth.

Rathi highlighted the opportunities presented by AI, tokenisation and open finance, while warning of growing threats from cybercrime, market manipulation, financial fraud and increasingly autonomous AI systems.

The FCA chief executive argued that regulation must move beyond traditional rulemaking towards a greater focus on outcomes, making better use of technology and existing regulatory powers.

FCA seeks to reduce unnecessary compliance burdens

Rathi said the regulator would continue modernising its rulebook while seeking to eliminate unnecessary compliance processes that divert resources from managing genuine risks.

He highlighted the need to move away from excessive data collection, duplicative assurance processes and what he described as ‘tickbox compliance’.

The FCA also intends to make greater use of AI within its own supervisory activities, including analysing regulatory returns, identifying emerging risks and detecting suspicious activity across large datasets.

These developments could allow supervisors to focus more resources on complex decisions and areas where consumer or market harm is greatest.

Rathi also stressed the importance of cooperation between regulators, financial services providers, Government and other organisations to address risks that extend beyond traditional regulatory boundaries.

He said: “The earlier we can work with you – the firms we regulate and civil society – to identify emerging risks and opportunities, the faster we can give you the confidence to move.”

FLA welcomes focus on innovation and partnership

Responding to Rathi’s speech, the Finance & Leasing Association welcomed the FCA’s emphasis on collaboration and the responsible adoption of emerging technologies.

The FLA said: “The UK has a significant opportunity to harness new technologies to improve customer experiences, strengthen safeguards and support economic growth.

“Consumer and asset finance providers play a vital role in powering the real economy, helping millions of households access essential goods and services and enabling businesses to invest and grow.”

The Association stressed that regulation must support innovation without imposing unnecessary barriers on lenders and finance providers seeking to adopt new technologies.

“As innovation accelerates, it is important that regulation remains focused on outcomes and does not create unnecessary barriers to the responsible adoption of technologies such as artificial intelligence. Used effectively, AI has the potential to improve risk management, strengthen fraud prevention and deliver better outcomes for customers.”

The FLA also supported Rathi’s call for closer cooperation between regulators and industry.

“We welcome the FCA’s emphasis on partnership between regulators and industry. Close collaboration will be essential to ensuring the UK remains a competitive, innovative and trusted financial services centre while maintaining high standards of consumer protection.”

Source: FCA, Market integrity in a digital age, 22 October 2026. The FCA notes that its published speech text may differ from the version delivered