UK financial watchdog wants power over AI and social media giants
Key Points
- FCA chair Ashley Alder said AI models and social media platforms could face UK financial oversight.
- A new regime already lets UK regulators test the resilience of major cloud providers.
- Alder cited the CrowdStrike outage, which grounded more than 10,000 flights.
- The FCA plans to launch a quantum toolkit with 25 international regulators in November.
Financial Conduct Authority (FCA) Chair Ashley Alder has signalled that AI models and social media platforms could soon face UK financial oversight.
Alder made the comments in a speech at the Michael D. Gill Lecture on international financial regulatory cooperation earlier this month.
He said the FCA, Bank of England and Prudential Regulation Authority (PRA) worked together on a Critical Third Parties Regime, which currently covers major cloud computing providers.
The regime gives UK financial regulators powers to test the resilience of services outside the financial sector for the first time.
“I think it’s a question that will come up more and more often – not only cloud services, but with AI models, data providers, social media platforms,” said Alder.
“And we’ll increasingly have to ask ourselves: what should be regulated, who should be regulated, and by whom?” he said.
Alder said the FCA is examining whether its legal perimeter covers the right activities. It is also looking at whether it can use existing powers more creatively to tackle risks that start outside the financial system.
“That does not mean we will be regulating these firms as if they were financial services firms, or assuming that every supplier is systemically significant,” said Alder.
Why cloud outages worry the FCA
Alder pointed to the 2024 CrowdStrike incident, when one faulty software update grounded more than 10,000 flights and severely disrupted health and payment services.
He said estimates put the cost of the outage to US Fortune 500 companies at $5.4 billion, even though it affected fewer than 1% of Windows devices.
“With so many firms relying on the same small group of cloud providers, data sources and AI models, a failure in one part is a global tripwire,” said Alder.
“The next economic crisis may not even originate in financial services; it may begin in a dependency,” he said.
Alder also warned about AI developers in China and the US.
“We are now contending with new threats posed by rogue AI models, whether designed in China or by Western companies intending to achieve multi-trillion dollar IPOs,” he said.
Joint testing with other countries
Alder said the FCA is working with the Monetary Authority of Singapore to develop tools that support safe and responsible AI adoption.
The FCA also leads work through the Global Financial Innovation Network on a quantum toolkit, which it plans to launch in November with input from 25 members, including US regulators.
Earlier this year, the UK took part in a cyber crisis simulation with fellow G7 countries to test how they would coordinate during a major cross-border incident.
Alder called for regular exercises covering major cyber attacks, cloud outages and disruption to digital money, involving financial firms and critical third parties as well as policymakers.
He also called for legal gateways, data-sharing standards and crisis protocols that would let regulators in different countries act quickly when a threat emerges.
