Officials from the ECB, Bank of England, BIS, IMF and UK FCA said rapid AI development could amplify volatility, cybersecurity threats and boom-bust dynamics, while slower regulation may leave Europe lagging the US.
European regulators and central bankers are warning that agentic AI is advancing faster than financial rulemaking can adapt, raising concerns about market volatility, cybersecurity and broader financial stability. Bank of England deputy governor Sarah Breeden said at the European Central Bank’s annual meeting in Sintra, Portugal, on Tuesday that agentic AI could amplify stress in markets and questioned whether safeguards are needed, “analogous to circuit breakers or kill switches” that could halt trading if faulty AI models triggered a market meltdown. ECB President Christine Lagarde later told Les Echos that AI poses a “major risk,” arguing that the speed and depth of new models have created dangers beyond the cybersecurity, hacking and data theft issues policymakers have discussed for years. UK Financial Conduct Authority (UK financial regulator) CEO Nikhil Rathi said traditional regulation cycles no longer fit technology that evolves in weeks or months, calling for “new tools” and a more collaborative approach with the market. The warnings come as Europe tries to avoid falling further behind the US in AI investment and frontier model development, since overly cautious regulation could push companies toward jurisdictions with lighter compliance. The Bank for International Settlements (global central bank forum) said on June 28 that AI “exuberance” could lead to a sharp pullback in asset prices and “disruptive macro-financial feedback loops” if tighter policy hits a stretched market, while IMF (International Monetary Fund) official Tobias Adrian warned on June 30 of a potential maturity mismatch between long-duration physical assets and shorter-term debt financing.