UK Banks Reassess AI Exposure as Regulators Heighten Risk Oversight

UK banks are independently reassessing their exposure to Artificial Intelligence (AI) amid growing concerns over market volatility and a potential sector correction, according to Katharine Braddick, Head of the Bank of England’s Prudential Regulation Authority (PRA).

In her first interview since assuming the role in July 2026, Braddick said lenders are reviewing client relationships and risk appetite on a case-by-case basis. While regulatory assessments have not indicated that banks would amplify an AI-related market shock, authorities remain vigilant. The PRA is not currently considering capital requirements to restrict AI exposure.

The PRA and Financial Conduct Authority are also preparing guidance on frontier AI and quantum computing risks, outlining governance expectations for financial institutions.

Separately, Braddick highlighted operational resilience as a growing priority, with the PRA examining the Bank of England’s proposed ‘minimum viable bank’ framework to ensure essential banking services remain operational during cyberattacks.

The developments reflect a broader regulatory shift towards balancing AI-driven innovation with financial stability, cybersecurity and robust risk governance.