FCA Chief Nikhil Rathi Outlines Strategy to Reshape Financial Regulation for the AI Era

The Financial Conduct Authority (FCA) is overhauling its approach to market oversight as artificial intelligence rapidly transforms financial services. Speaking at techUK’s Agents of Change event, FCA Chief Executive Nikhil Rathi emphasised that with more than 80% of financial firms already adopting AI, the focus must shift to scaling these technologies safely while ensuring market integrity, competition, and trust. Rathi identified two major technological developments driving this transition: agentic AI and tokenisation. While previous generative AI applications primarily focused on summarisation and automation, agentic systems are poised to coordinate and execute live transactions in both retail and wholesale markets. In trading workflows and liquidity management, autonomous agents present profound structural shifts. However, Rathi warned that clear human accountability and governance must remain intact so investors and consumers retain confidence in delegated systems. On infrastructure, Rathi pointed to tokenisation as a critical enabler of programmable finance. He highlighted the FCA's recent approval of the UK’s first natively tokenised authorised fund—launched by Baillie Gifford alongside Bank of New York Mellon—and referenced joint initiatives with the Bank of England to set regulatory directions for wholesale tokenised markets. To keep pace with the speed of innovation, the FCA is changing how it regulates, prioritising proactive stewardship over delayed rule-making. The regulator is currently exploring the deployment of agentic AI as a "first responder" to monitor wholesale market activity, analysing one billion rows of data per day to detect and address market abuse more rapidly. Rathi stressed that the FCA will not wait for formal legislation to catch up when emerging risks threaten market integrity, citing earlier interventions in sectors like Buy Now Pay Later. Systemic resilience was also underscored as a primary regulatory priority. Last year, 98% of operational incidents reported to the FCA stemmed from technology and cyber disruptions, while payment fraud accounted for nearly £1.3 billion in losses. As financial institutions grow more dependent on complex AI supply chains and cloud infrastructure, Rathi stressed the necessity of robust governance under the Critical Third Parties regime and active collaboration across regulators and technology platforms. The FCA plans to continue supporting market experimentation through initiatives such as its Supercharged Sandbox—partnered with technology firms including Nvidia and Google—its AI Lab, and the Agentic Academy. In the coming weeks, the regulator will release the Mills Review on AI's impact on retail financial services, followed by supervisory guidance outlining good and poor AI practices across the sector.