Mills Review seeks input on AI in financial services
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The Financial Conduct Authority has launched a call for input to feed into a review of the impact advanced artificial intelligence will have on consumers, retail financial markets and regulators. Comments can be sent until 24 February.
Led by Sheldon Mills, who stepped down from his post as the FCA’s executive director consumers and competition to conduct the review, the ‘Mills Review’ builds on the FCA’s AI Discussion Paper, AI Sprint, and AI Lab including AI Live Testing, as well as its ‘Supercharged Sandbox’ supported by NVIDIA.
It is estimated that more than 75% of UK financial services firms use AI, with the largest take-up among insurers and international banks, including to automate administrative functions, and to process insurance claims and credit assessments.
With AI already forming part of financial services, the City regulator says rapid advances in generative, agentic and emerging forms of AI mean future change could potentially reshape markets, change the way firms compete and how consumers use retail financial services.
“AI is already shaping financial services, but its longer-term effects may be more far-reaching. This review will consider how emerging uses of AI could influence consumers, markets and firms, looking towards 2030 and beyond,” said Mills. “By taking a forward-looking view, the review will help the FCA continue to support innovation while promoting the safe and trusted adoption of AI in retail financial services.”
The FCA is seeking views on four connected areas:
how AI could evolve in the future, including the development of more autonomous and agentic systems;
how these developments could affect markets and firms, including changes to competition and market structure and UK competitiveness;
the impact on consumers, including how consumers will be influenced by AI but also influence financial markets through new expectations; and
how financial regulators may need to evolve to ensure that retail financial markets work well.
Wholesale markets and broader societal impacts are out of scope of the review, but it “recognises that developments in these areas may indirectly influence retail financial services and will be considered where relevant”, the FCA said, noting that it is conducting “extensive work on the impact of AI in wholesale markets” separately.
Mills is seeking a wide range of views including from financial firms, consumer groups, trade associations, technology providers, politicians and academics.
The feedback the FCA receives will shape a series of recommendations to be reported to the regulator’s board in the summer and inform how the FCA can guide and respond to AI-driven transformation, to be shared in an external publication.
Richard Pinch, senior risk director at consultancy Broadstone, said the Mills Review is a sign that regulators are looking beyond today’s use of AI towards its long-term impact.
“The challenge across the market will be to demonstrate that AI-driven models and tools align with the ethos of Consumer Duty as they evolve. Those that build strong oversight frameworks now will be better placed to innovate with confidence while meeting the FCA’s expectations,” Pinch said.
MPs slam FCA, BoE and Treasury over approach to AI in finance
The call for input to the Mills Review comes after a report by the Treasury Committee warned last week that while AI can bring benefits to consumers, the UK is unprepared for AI-related shocks. It suggests that the Bank of England, the FCA and the Treasury are exposing the public and the financial system to potentially serious harm due to their "wait-and-see approach to AI in financial services”.
“Firms are understandably eager to try and gain an edge by embracing new technology, and that’s particularly true in our financial services sector which must compete on the global stage,” said Dame Meg Hillier, who chairs the committee.
However, she said the risks need to be better managed. “Based on the evidence I've seen, I do not feel confident that our financial system is prepared if there was a major AI-related incident and that is worrying. I want to see our public financial institutions take a more proactive approach to protecting us against that risk,” she said.
The report, which follows an inquiry into AI in financial services last year, recommends that the Bank of England and the FCA conduct AI-specific stress-testing to boost businesses’ readiness for any future AI-driven market shock.
It proposes the FCA should publish practical guidance for firms by the end of the year, and that the Treasury should designate major AI and cloud providers as critical third parties to the financial system. This would mean they will fall under the Critical Third Parties regime introduced a year ago but which the government has not made use of to date.
What regulations are needed to ensure AI is beneficial rather than destabilising?
