European central banks and financial regulators urged safeguards, warning that agentic artificial intelligence could amplify volatility during periods of financial market stress. Cointelegraph also reported concerns that existing regulatory frameworks struggle to keep pace with rapid advances in AI.

Cointelegraph reported on July 6 that Bank of England Deputy Governor Sarah Breeden raised at the European Central Bank’s annual forum in Sintra, Portugal, whether tools are needed to limit or halt trading across markets in case a faulty AI model triggers a market crash. She compared such measures to circuit breakers or a kill switch, saying agentic AI could amplify volatility when market stress intensifies.

European Central Bank President Christine Lagarde said in an interview with a French media outlet that AI technology carries significant risks. She said cyber security, hacking and data theft risks have been discussed over the past decade, but the rapid development of AI models is creating far more serious risks. She added that defensive measures and the funding to support them are still not sufficiently in place.

UK Financial Conduct Authority Chief Executive Nikhil Rathi said the existing regulatory cycle makes it difficult to respond to fast-moving AI development. He said new tools and approaches are needed to work more collaboratively with the AI market.

Concerns were also raised that designing regulation too cautiously could widen Europe’s gap.

While U.S. companies lead AI investment and advanced model development, Europe’s financial markets have fewer channels than the U.S. stock market for capital to flow into AI. Critics said that if regulatory burdens rise in this environment, AI companies could move to regions with looser rules.

The Bank for International Settlements warned on June 28 that AI overheating could have major financial repercussions. It said that if central banks tighten policy to curb inflation, a sharp correction in AI-related asset prices could follow a long period of risk appetite, and the shock could spread across the broader macro-financial system.

Breeden said debt financing in AI-related sectors is rising rapidly. Tobias Adrian, director of the International Monetary Fund’s Monetary and Capital Markets Department, also warned on June 30 of a potential mismatch between the maturity of real assets and the maturity of debt.