On 29 April 2025, the Financial Conduct Authority (FCA) published an engagement paper setting outs its proposal to launch Artificial Intelligence (AI) Live Testing.

Background

The FCA explains that the adoption of AI by the UK financial services sector can help it to achieve its objectives of becoming a smarter regulator and supporting innovation and sustained economic growth in the UK market. It sees collaborating with industry as a crucial next step in “ensuring a robust, proportionate and pro-growth outcome that protects consumers and markets”.

Proposals

AI Live Testing would be launched as part of the FCA’s existing AI Lab and is intended to explore the challenges that firms face before live AI deployment in financial markets. It would involve the FCA’s regulatory and technical teams working directly with firms, providing tailored support as firms develop, assess and deploy live AI models. The aim is to foster collaboration, develop shared understanding, and explore evaluation methods (e.g. model metrics) and potential frameworks or benchmarks that may facilitate safe and responsible AI use throughout its lifecycle, from input quality control to outcomes measurement.

The FCA plans to provide participants with access to appropriate AI expertise as well as regulatory expertise and will seek to understand the nature of any emerging regulatory challenges they may face. Participant firms will need to demonstrate that they have carried out effective pre-deployment testing and are ready to deploy into controlled live market environments, interacting with consumers. The FCA will also have a range of tools it can use to provide firms with “regulatory comfort” during the AI testing, where appropriate to do so, which may include providing individual guidance, waivers or modifications to requirements (similar to the Regulatory Sandbox).

Questions

The engagement paper asks questions including:

  • What the primary blockers are that firms encounter prior to live market deployment of AI models.
  • Whether the FCA proposal for AI Live Testing would address potential AI deployment challenges.
  • Whether firms have any other feedback on the proposals.

Next steps

The deadline for responses to the engagement paper is 10 June 2025, with a proposed start date of summer 2025 for the AI Live Testing.

The FCA currently expects AI Live Testing to run for approximately 12 months, with periodic updates on findings and a final report being provided. If successful, the AI Live Testing functionality may be integrated into established FCA services.