Bank of England weighs marketwide ‘kill switches’ for AI trading

At the ECB Sintra Forum, Deputy Governor Sarah Breeden warned the Bank of England is examining marketwide ‘kill switches’ that could halt trading if autonomous AI agents behave dangerously. She said existing, technology-neutral regulatory frameworks may not be adequate and firms cannot assume a human will monitor every agent action.

Breeden described a shift in AI capability since late 2024: systems can now chain sequences of actions without direct human direction. Those agents can transact for consumers and merchants, execute trading strategies and search for cyber vulnerabilities across networks.

The Bank is running simulation exercises with the Bank for International Settlements’ Innovation Hub and Germany’s Bundesbank to identify which agent designs might cause herding or amplify market volatility. Breeden raised the possibility of guardrails similar to circuit breakers, or novel marketwide ‘kill switches’, to limit or stop trading if faulty models threaten stability.

Regulators agreed steps in April after criticism from MPs. In January, Treasury Committee chair Meg Hillier said the finance sector was not prepared for a major AI-related incident and criticised a ‘wait-and-see’ approach adopted by authorities.

Breeden identified cyber risk as the most pressing stability concern. She noted that AI tools have exposed decades-old software flaws and that talks took place between major UK banks and regulators in April. In her view, defenders using AI can improve resilience, while malicious use of the same tools could raise the likelihood of attacks that harm financial stability.

She urged faster patching across banks, key third-party technology providers and wider national infrastructure to reduce the risk of mass disruption. Operational responses under consideration include arrangements that allow other firms to provide basic services to customers of a disrupted bank; Breeden pointed to Ukraine’s Power Banking programme, launched in 2022, as an example.

Other options include requiring key firms to maintain separate failover systems or to rebuild compromised core systems quickly from ‘bare metal’. Breeden called for tighter governance, more simulation testing and contingency planning as the Bank assesses technical and regulatory measures for more agentic AI in financial markets.