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Britain Needs AI Stress Tests for Financial Services, Lawmakers Say

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British lawmakers are urging regulators to introduce artificial intelligence-specific stress tests for the financial sector, warning that current oversight is not sufficient to protect consumers or ensure market stability as AI adoption accelerates.

In a report on AI in financial services, the Treasury Committee said the Financial Conduct Authority and the Bank of England should move beyond a “wait and see” approach. The committee recommended running AI-focused stress tests to help firms prepare for potential market shocks triggered by automated systems.

Committee chair Meg Hillier said she was not confident the financial system could withstand a major AI-related incident, calling the situation worrying as increasingly autonomous systems influence decisions. Around three-quarters of UK financial firms now use AI in core functions such as insurance claims processing and credit assessments.

While acknowledging benefits, the report warned of significant risks, including opaque credit decisions, exclusion of vulnerable consumers through algorithmic targeting, fraud, and the spread of unregulated financial advice via AI chatbots. Lawmakers also highlighted potential threats to financial stability, including reliance on a small number of U.S. technology providers and the risk that AI-driven trading could amplify herding behaviour in markets.

The committee urged the FCA to issue guidance by the end of 2026 on how consumer protection rules apply to AI and what level of understanding senior managers must have of the systems they oversee. The FCA said it would review the report, while the Bank of England said it would consider the recommendations. Separately, Britain’s finance ministry appointed senior figures from Starling Bank and Lloyds Banking Group to help guide AI adoption in financial services.

Coinbase Urges US Regulators to Clear Path for Banks to Offer Crypto Services

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On Tuesday, Coinbase Global renewed its call for U.S. banking regulators to clarify or revise their stance on banks providing cryptocurrency services and forming partnerships with digital asset companies. The move comes amid a broader push by the crypto industry to lobby lawmakers for a regulatory framework that could foster the sector’s growth. Most traditional U.S. banks have been hesitant to engage with digital asset firms, citing the lack of regulatory clarity.

Coinbase’s Chief Policy Officer, Faryar Shirzad, expressed frustration on social media, claiming that U.S. bank regulators have “unilaterally and undemocratically” prohibited banks from offering crypto services. This marks the latest in a series of efforts by the crypto industry to press for more favorable regulations.

The crypto sector has been actively working to influence political outcomes, having donated millions of dollars to support Donald Trump’s bid for the White House, hoping to prioritize cryptocurrency regulation under a potential new administration. Shirzad also reached out directly to top U.S. banking regulators, including the Office of the Comptroller of the Currency (OCC), the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC), urging them to allow banks to engage with crypto businesses. However, the OCC declined to comment, and the Fed and FDIC did not immediately respond to inquiries.

The crypto industry has often accused U.S. regulators of deliberately hindering their access to the traditional financial system. While regulators have denied these accusations, the recent move by the U.S. Securities and Exchange Commission (SEC) to create a task force focused on developing a regulatory framework for crypto assets signals a potential shift in policy.

Former PayPal executive David Sacks has also been appointed as Trump’s “White House A.I. & Crypto Czar,” further suggesting that digital assets may receive more attention from the government if Trump is reelected. Despite these political shifts, U.S. banks have remained cautious about adopting cryptocurrencies in their services.

 

Morgan Stanley to Increase Sale of Loans Tied to Musk’s X Amid Strong Demand

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Morgan Stanley, leading a group of banks, is set to increase the sale of loans linked to Elon Musk’s social media platform X, following stronger-than-expected demand from investors, according to Bloomberg News on Tuesday. Initially, the banks had planned to sell around $3 billion in loans, but the revised target now stands at up to $5.5 billion, reflecting investor interest that exceeded expectations.

In November, reports indicated that Musk’s rising political influence and connections to former President Donald Trump played a role in improving prospects for the platform, which helped banks manage the debt sale without incurring heavy losses. Morgan Stanley, along with other financial institutions like Bank of America and Barclays, provided Musk with loans in 2022 to support his $44 billion acquisition of X, formerly known as Twitter.

Typically, banks sell such loans to investors shortly after a deal is finalized, but the process has been more challenging in the case of X. Despite this, the latest demand suggests a more favorable outcome for the banks involved.