Bank of England tests how AI trading agents could cause financial crisis
It is also looking at “risks to UK financial stability” from the growing adoption of artificial intelligence
The Bank of England is testing whether AI agents trading in financial markets could unleash a financial crisis.
The Bank is examining how the technology could demonstrate correlated behaviour, known as herding, in trading and exacerbate market swings.
It is also looking at “risks to UK financial stability” from the growing adoption of artificial intelligence.
The move was announced in the organisation’s response to the Treasury Select Committee, which had recommended AI-specific stress testing.
Dame Meg Hillier, chairwoman of the influential committee of MPs, welcomed the step.
But she said she was “perplexed at the apparent inertia shown by the Treasury” after it failed to commit to bringing major AI and cloud providers into the Critical Third Parties Regime before the end of the year.
The regime gives the Financial Conduct Authority and the Bank of England powers of investigation and enforcement over non-financial firms which provide critical services to the UK financial services sector.
The Government is responsible for deciding which firms are brought into this regime.
Economic Secretary to the Treasury Lucy Rigby told the committee the Treasury is “in the process of gathering the necessary evidence to support decision-making in relation to a number of potential designations”, with initial designation decisions expected this year.
She said: “Due to the iterative nature of the designation process and the need to maintain its integrity, we do not intend to release further information until designations have been made.”
Dame Meg said: “Recent developments in the world of AI, such as Anthropic’s Project Mythos, show us how fast this transformative technology is moving.
“It has never been more important that those responsible for maintaining the UK’s financial stability take a proactive approach to understanding and mitigating the risks AI may pose to our financial system.
“I am pleased to see the Bank of England is grasping the nettle to some extent but I remain perplexed at the apparent inertia shown by the Treasury.
“The disruption which could be caused to our financial services system by an outage at a major provider could be extremely damaging.
“The powers offered by the Critical Third Parties Regime are sitting unused while we remain vulnerable.
“I simply cannot understand why this is taking so long. We will continue to monitor this situation closely.”
Published: by Radio NewsHub