European regulators warn AI outpaces finance oversight

European financial regulators and central bankers are warning that the rapid advancement of autonomous, or "agentic," artificial intelligence is outstripping their ability to supervise it, creating new and systemic risks for financial markets. Officials said in remarks this week that traditional regulatory cycles are ill-suited to a technology that evolves in weeks or months, potentially amplifying instability during periods of market stress.

Sarah Breeden, a deputy governor of the Bank of England, argued that such AI could intensify market disruptions. Speaking on Tuesday at the European Central Bank's annual meeting in Sintra, Portugal, Breeden questioned whether regulators should implement guardrails analogous to circuit breakers or "kill switches" to limit or halt trading if faulty AI models triggered a marketwide meltdown. She emphasized the risk of correlated behavior, where multiple AI-driven systems reacting to the same signals could turn a localized error into a systemic crisis.

Breeden also tied the issue to a competitive gap, noting that U.S. companies currently lead in AI investment and development. She warned that overly cautious regulation in Europe could widen...