FCA Boss Nikhil Rathi Warns: AI Demands a Radical Shift in Regulation

The FCA’s Nikhil Rathi has sent a stark warning to the financial world. AI is moving faster than old regulations can handle. Rathi says the relationship between regulator and regulated must be “totally different.” With algorithms running trading floors, customer interactions, and risk models, weak oversight could create a playground for scammers and rogue operators.

Traditional rules are struggling to keep pace. Regulators must act fast, balancing innovation with accountability. AI adds risks around bias, transparency, and data handling. Financial firms are deploying systems that learn and decide at machine speed. Without proper checks, flawed models could mislead markets or compromise investor protections.

Ethics are central. Rathi urges regulators to engage with technologists, ethicists, and industry leaders. AI systems must operate fairly and transparently. Gaps in oversight could be exploited, amplifying losses and shaking market confidence.

Failing to adapt could trigger data mishandling, algorithmic bias, and unchecked manipulation. Regulators need to embed safeguards before AI systems go live. The risk is real: markets are already seeing AI-driven trading errors and fraud attempts.

Rathi’s message is clear: the AI revolution demands urgent regulatory reinvention. Firms must cooperate with regulators to maintain oversight, enforce accountability, and prevent scams. AI is transforming finance, but strong, flexible oversight is now the frontline defense for market integrity and investor safety.