Bank of England weighs ‘kill switches’ to halt rogue AI trading

The Bank of England is considering trading ‘kill switches’ that would pause market activity if autonomous AI models behave unexpectedly, Deputy Governor Sarah Breeden told delegates at the European Central Bank’s Sintra Forum.

Breeden said regulators must review existing rules because AI agents can now chain actions and make decisions without direct human control. She noted a shift since late 2024, when systems moved from basic reasoning to executing sequences of tasks on their own. She told the forum: ‘Our frameworks were not built to contemplate autonomous agents, and relying on a human in the loop for all agent actions is unlikely to be realistic.’

Banks currently use autonomous AI mainly for lower-risk tasks such as research, but Breeden said those applications could expand into trading. She warned that if many AI agents react similarly to the same signals, they could create herding that amplifies market swings during stress.

The Bank is working with the Bank for International Settlements Innovation Hub and the Bundesbank on simulation methods to test which agent designs might drive herding behaviour. Regulators are also examining whether safeguards similar to circuit breakers, or formal market-wide ‘kill switches’, would be needed to stop trading if faulty models threaten stability.

Breeden identified cyber risk as a pressing issue. She said agentic AI can find software and system vulnerabilities at scale. Work with major UK banks followed findings that AI tools had uncovered long-standing weaknesses. She said defenders must keep an advantage as malicious actors develop comparable capabilities.

She called for faster patching of vulnerabilities across banks, key third-party technology providers and national infrastructure to limit systemic risk. Regulators are also considering whether regulated firms should have enhanced recovery options for core systems, including arrangements for other institutions to provide basic services to customers of affected banks.

Breeden cited Ukraine’s Power Banking programme as an example of one institution taking on basic functions for another during disruption and suggested regulators could require key firms to maintain separate failover systems or the ability to rebuild core systems rapidly from ‘bare metal.’

Her remarks followed criticism from the Treasury Committee in January that the financial sector was not prepared for a major AI-related incident. In April, the Bank of England and the Financial Conduct Authority began taking steps in response to those concerns.