AI agents are challenging the existing model of financial supervision, new Zango analysis finds
As Parliament considers major reforms to the UK’s financial regulatory framework through the Financial Services and Markets Bill, new analysis from Zango AI suggests that the rise of increasingly autonomous AI is driving a broader rethink of how financial institutions are supervised.
The analysis, which includes a foreword from the Rt Hon John Glen MP, Treasury Committee member and former City Minister, points towards a more continuous and system-wide approach to financial supervision as AI systems become increasingly capable of planning, deciding and acting with limited human intervention.
Meanwhile, the Financial Services and Markets Bill would give regulators greater flexibility over parts of the accountability framework by removing certain prescriptive statutory requirements and giving the FCA and PRA greater scope to determine how the framework operates through their rulebooks.
The Rt Hon John Glen MP said: “The existing framework was built for a world in which senior managers make decisions and can be held directly accountable for them, not for a world in which autonomous agents act continuously. The Mills Review, the Bank of England’s Financial Stability Report and recent FCA commentary all indicate that regulators are grappling with whether technology-neutral regulation remains sufficient as AI changes the nature of accountability and concentration risk. That deserves a serious answer.”
The report also includes contributions from senior legal, compliance and risk practitioners from Lloyds Wealth, DNB, LaSalle and other financial institutions, examining how firms are responding in practice to the governance, accountability and control challenges created by increasingly capable AI systems.
Zango’s analysis argues that the emerging response is an evolution of the broader supervisory toolkit: greater use of market-wide powers, more continuous monitoring, and increasingly AI-enabled approaches capable of identifying emerging risks and common dependencies across the financial system.
For firms, this raises practical questions around accountability, oversight and evidence. As AI moves from assisting staff towards planning, deciding and acting, financial institutions will need to demonstrate who is responsible for AI-enabled processes, where human judgement remains necessary, how autonomous systems are monitored and whether their actions can be reconstructed and evidenced.
It also changes the role of compliance. Rather than reviewing AI-enabled decisions only after the fact, compliance functions may increasingly need to shape how systems are designed, governed, tested and monitored before and during deployment.
These themes will be discussed at a private roundtable convened by Zango AI with the Rt Hon John Glen MP and around 20 senior compliance and risk leaders from the wealth and asset management sector, held under the Chatham House Rule.
Ritesh Singhania, CEO and co-founder of Zango AI, said: “The next phase of AI in financial services will be defined not just by better models, but crucially by the controls and processes around them. We work with financial institutions to deploy AI agents, and we are seeing risk management become more continuous and embedded, rather than reliant on periodic manual assessment. That mirrors where supervision itself appears to be heading. Increasingly, the same technology driving this shift can help firms meet it, strengthening the controls and evidence regulators expect – especially as regulators adopt AI themselves.”
Zakaria Ouraich, Head of UK Compliance at LaSalle, said: “AI adoption should be considered as a portfolio of organisational experiments with clear hypotheses and measured outcomes, not a simple procurement exercise with a focus on token costs. Compliance professionals should absolutely be part of those discussions and ensure that outcome measurement includes not only regulatory requirements, but also client, operational and financial outcomes.”
The AI Regulatory Edge draws together recent developments from the FCA, Bank of England, HM Treasury and international standard-setters, examining how advances in AI are beginning to reshape accountability and supervision.
