Artificial intelligence is rapidly transforming the global financial system, and central banks must adapt their regulatory frameworks and operational capabilities to keep pace, according to Sarah Breeden of the Bank of England.

In a keynote address on AI and financial stability, Breeden highlighted the emergence of "agentic AI"—systems capable of autonomously reasoning, planning and executing complex tasks—as a major technological shift with far-reaching implications for financial markets, payments, cybersecurity and regulatory oversight.

Unlike earlier generative AI models that primarily responded to prompts, agentic AI can independently chain together multiple actions, potentially enabling autonomous trading strategies, AI-driven payment systems and sophisticated cyber operations. While these capabilities promise greater efficiency and innovation, they also introduce new systemic risks that could threaten financial stability.

Breeden identified cybersecurity as one of the most immediate concerns. AI-powered tools are strengthening cyber defence capabilities, but they are also enhancing the sophistication of cyberattacks. She stressed that financial institutions, technology providers and critical infrastructure operators must accelerate vulnerability detection, patch management and operational resilience to stay ahead of evolving threats.

The speech also examined the growing role of AI in financial markets. As autonomous AI agents become more widely deployed in trading, there is a risk that similar algorithms could amplify market volatility or trigger herding behaviour during periods of stress. Breeden suggested that regulators should explore AI-specific safeguards, including enhanced stress testing, simulation models, circuit breakers and governance frameworks to mitigate these risks.

In the payments ecosystem, the Bank of England is already working with industry partners to design next-generation retail payment infrastructure capable of supporting AI-driven commerce. However, Breeden noted that issues such as user consent, liability, interoperability and regulatory accountability must be addressed before autonomous payment agents become mainstream.

Emphasising that AI innovation is accelerating at an unprecedented pace, Breeden called for stronger international cooperation among central banks, regulators and policymakers. She concluded that proactive governance, scenario planning and resilient financial infrastructure will be essential to ensure that AI strengthens rather than destabilises the global financial system.