- The Bank is examining how AI investment and adoption are reshaping financial markets.
- A key concern is “herding” behavior, where firms use similar AI strategies that could worsen market sell-offs.
The Bank of England has started testing how artificial intelligence could destabilise the UK financial system, as pressure grows on the government to tighten oversight of big technology providers.
In a letter to parliament’s Treasury Committee, as reported by Reuters, the central bank said it is running scenario analysis and simulations focused on AI‑related risks. It rejected the committee’s earlier claim that it had taken a “wait‑and‑see” stance, saying it actively examines how AI investment and adoption are changing the financial system.
Deputy Governor for Financial Stability Sarah Breeden said the Bank is working with international counterparts to assess how AI agents might affect trading in financial markets. The tests focus in particular on potential “herding” behaviour, where many firms follow similar AI‑driven strategies, which could amplify sell‑offs during periods of market stress.
See Related: Is The U.S. Dollar Still Safe? Why The Bank Of England Is Asking Tough Questions
Central Bank Runs Stress Scenarios
Concerns about AI risks have intensified following the launch of Anthropic’s Mythos product. Experts say its advanced coding capabilities could help identify cybersecurity vulnerabilities and provide new ways to exploit them.
Bank of England Governor Andrew Bailey said Anthropic may have “found a way to crack the whole cyber risk world open”.
The Treasury Committee also criticised the finance ministry for failing to commit to bringing major AI and cloud companies into the UK’s Critical Third Parties (CTP) regime before the end of 2026. The regime is designed to regulate key technology suppliers to the financial system.
Committee chair Meg Hillier said she welcomed the Bank’s actions but questioned what she described as Treasury “inertia”.
Treasury minister Lucy Rigby told lawmakers the government expects to make initial CTP designation decisions this year, but declined to name the firms under consideration, citing the need to protect the process.
