A senior official at the Bank of England has warned that increasingly sophisticated artificial intelligence systems may require new regulatory frameworks to protect the financial system.

Deputy Governor Sarah Breeden said existing financial regulations may need updating as AI becomes more deeply integrated into banking, investment and payment services.

Financial institutions are rapidly adopting AI to improve fraud detection, customer service, risk management and investment analysis.

While these technologies offer major efficiency gains, regulators are also examining the potential risks associated with widespread AI deployment.

Officials believe future regulations should encourage innovation while ensuring financial stability.

The Bank of England continues working with industry leaders to better understand how advanced AI models could influence markets during periods of economic stress.

Business leaders generally support clear regulatory guidance because it provides greater certainty for long-term investment decisions.

Many financial firms believe responsible AI governance will strengthen consumer trust and encourage wider adoption of emerging technologies.

Analysts expect governments and central banks around the world to increase their focus on AI regulation as financial institutions continue accelerating digital transformation.

Source: Reuters