Sheilah MackieThe BoE and PRA have responded to January’s letter on AI-driven innovation from the Chancellor, the DSIT and the DBT. The response explains the regulators’ plans to enable safe AI innovation within the financial sector. It notes that the 2022 financial regulators’ survey suggested that respondents saw no particular regulatory barriers to the safe and responsible adoption of AI in UK financial services, but that there were concerns over how regulators in different jurisdictions were reacting and the risks of using third party models and data. As a result, the 2023 version of the Model Risk Management Principles for banks, while technology-agnostic, deliberately included factors relevant to the use of AI models. The regulators intend to build on this in 2026, and the PRA will explore AI in its supervisory dialogues with firms.
The letter also explains the AI Consortium established with the FCA in May 2025 to be a platform for public-private engagement, and which is currently focussed on work to:
- address concentration risks from third-party model providers;
- the evolution of AI “edge cases” as adopting moves towards cases more relevant for financial stability;
- explainability and transparency in generative AI; and
- AI-accelerated contagion in financial markets.
The group also continues to support the AI taskforce and participates in round tables with representatives from different parts of the PRA’s regulated community.
The letter also explains the PRA’s international engagement and how it plans to use AI to support and enhance its own work.