FCA To Review AI Impact on Financial Sector + Ashurst Comment

In a move that could indirectly impact the commercial legal world, the Financial Conduct Authority (FCA) in the UK is consulting on how to regulate AI and its impact on the financial services sector. (Plus, see comment by Ashurst on this below).

The project, which is known as the Mills Review, after its main protagonist Sheldon Mills, will be far-reaching and could in the short-to-medium term lead to new regulations, or at least new compliance obligations. The UK is often seen as a leader in complex regulation and so, what the FCA does here could have a global impact in time. (E.g. consider how the regulations for alternative legal businesses in the UK have been taken up in the US.)

The FCA is seeking views on four interrelated themes, they said, which cover:

1. ‘How AI could evolve in the future, including the development of more autonomous and agentic systems.
2. How these developments could affect markets and firms, including changes to competition and market structure and UK competitiveness.
3. The impact on consumers, including how consumers will be influenced by AI but also influence financial markets through new expectations.
4. How financial regulators may need to evolve to continue ensuring that retail financial markets work well.’

In short, it’s almost the whole enchilada that they’re looking at when it comes to AI and financial services. The FCA view is also that we should all stop treating AI as a frontier technology, or as an experiment, and that it’s here for real now and is embedding day-by-day. Thus, a sturdy approach is needed, just as is the case for any other key element of the economy.

Any changes to regulation would alter the advice law firms give to their clients, and in some cases could perhaps alter how they use AI as well on client matters, at least among those law firms deeply engaged in areas such as banking. For example, using agents on critical legal work for major institutions.

We shall see what comes of this, but it feels like this won’t just be a ‘nothing burger’, even if its output takes some time to evolve into actual regulatory change.

The FCA commented: ‘AI is already embedded across financial services. Rapid advances in generative, agentic and emerging forms of AI mean the next phase of change could be profound, having the power to reshape markets, change the way firms compete and how consumers use retail financial services.’

And review lead, Sheldon Mills, added: ‘AI is already shaping financial services, but its longer-term effects may be more far-reaching. This review will consider how emerging uses of AI could influence consumers, markets and firms, looking towards 2030 and beyond.

‘By taking a forward-looking view, the review will help the FCA continue to support innovation while promoting the safe and trusted adoption of AI in retail financial services.’

Feedback will shape a series of recommendations to be reported to the FCA Board in summer 2026, informing how the FCA can guide and respond to AI-driven transformation. This will culminate in an external publication, they added. The deadline for comments is Tuesday 24 February 2026.

The Mills Review’s initial paper is here.

If you want to send in your views they can be sent to: TheMillsReview@fca.org.uk.

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Comment from global law firm Ashurst, via their partner Fiona Ghosh:

‘The announcement of the Mills Review couldn’t be more timely, coming hot on the heels of the Treasury Select Committee’s call-to-arms for UK regulators to be more on the front foot on AI risks. Mills’ intention is to draw on 4 themes – future evolution of tech, future impact of AI on markets and firms, future consumer trends and, ultimately, the future regulatory approach to be adopted.

The FCA is clear that AI brings great opportunities for consumers in terms of faster innovation to meet individual needs, the production of better and more accurate data insights (accelerated through Open Finance and data access). There is now the real possibility of fully automated yet highly optimised household finances (e.g. automatic switching). Equally, UK firms are moving at pace in their AI adoption journey, taking a leading edge over many of their European counterparts in experimenting with the possibilities that AI systems offer to middle and back office functions.

At the same time, the FCA has held a long-standing position that AI is no longer an emerging technology and should be treated in line with existing regulations on consumer duty, good customer outcomes, operational resilience, security and the duties of senior managers.

Mills has set himself an ambitious task in attempting to bring together the many and diverse strands of work undertaken by the FCA on the topic of AI in financial services (and building on the AI Live Testing, AI Lab, AI Consortium and Supercharged Sandbox etc). 

We anticipate that this report will be highly influential in setting the tone and direction of AI policy and adoption in financial services for the next decade and beyond.’

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Conference News

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