European central bank leaders call for AI guardrails to protect markets

European regulators have warned that rapid advances in agentic artificial intelligence have outpaced existing rulemaking, with central banks and financial authorities calling for new safeguards to reduce risks to financial markets.

According to remarks made during the European Central Bank’s annual meeting in Sintra, Portugal, senior policymakers said current regulatory processes are struggling to keep pace with AI systems that are evolving within weeks or months rather than years.

Speaking at the event on Tuesday, Bank of England Deputy Governor Sarah Breeden said policymakers should consider safeguards similar to market circuit breakers or kill switches that could halt trading if faulty AI models trigger a market-wide disruption during periods of stress.

Breeden said agentic AI could amplify market volatility and added that rising debt financing tied to AI investments could increase financial stability risks if AI-related asset prices decline sharply.

These concerns were raised just days after the Bank for International Settlements warned in a June 28 report that prolonged enthusiasm around artificial intelligence could leave markets exposed to a sudden correction. According to the BIS, tighter monetary policy to contain inflation could trigger a sharp fall in AI-related asset prices after extended risk-taking, creating disruptive macro-financial feedback loops.

Among others, Tobias Adrian, Director of the International Monetary Fund’s Monetary and Capital Markets Department, told Bloomberg on June 30 that the sector also faces a potential mismatch between the long-term nature of physical AI infrastructure and the shorter maturity of the debt used to finance it.

Regulators say traditional rulemaking is too slow

Elsewhere, European Central Bank President Christine Lagarde told French newspaper Les Echos on Thursday that artificial intelligence now presents a more serious challenge than traditional cybersecurity threats because the technology is advancing rapidly while defensive capabilities and funding are still catching up.

In a separate interview with CNBC’s Squawk Box, UK Financial Conduct Authority Chief Executive Nikhil Rathi said conventional regulatory cycles are no longer suited to technologies that change over weeks or months. Rathi said regulators will need new approaches and closer cooperation with industry instead of relying solely on lengthy rulemaking processes.

The latest warnings follow recent policy debates over access to advanced AI systems in Europe. 

Last month, Austria urged the European Union to explore establishing Anthropic within the bloc after U.S. export restrictions limited foreign access to the company’s most advanced AI models. 

Austrian State Secretary for Digitalization Alexander Proell argued that Europe should not risk losing access to frontier AI because of decisions made outside the region.

As previously reported, Anthropic suspended public access to its Fable 5 and Mythos 5 models in June after a U.S. export control directive required the company to block access for foreign nationals over cybersecurity concerns tied to a reported jailbreak technique. 

U.S. authorities later cleared the models for redeployment after Anthropic introduced new classifiers and safeguards designed to block cybersecurity-related misuse.