Question 1

How does the FCA regulate AI in 2026?

Accepted Answer

The FCA regulates AI through a principles-based framework focusing on Consumer Duty outcomes, requiring firms to demonstrate that AI-driven decisions result in good customer outcomes. This includes mandatory explainability requirements, foreseeable harm assessments, and accountability trails under the SM&CR regime.

Question 2

What is the AI accountability gap in SM&CR?

Accepted Answer

The AI accountability gap refers to the challenge of assigning personal responsibility under SM&CR when decisions are made or influenced by AI systems. Senior Managers must demonstrate 'reasonable steps' to ensure AI outputs comply with regulations, requiring comprehensive audit trails and explainability documentation.

Question 3

What are the UK AI Governance principles for financial services?

Accepted Answer

The UK's five AI governance principles for financial services are: Safety & Security, Transparency, Fairness, Accountability, and Contestability. These principles guide how AI must be deployed in regulated financial services to ensure consumer protection and regulatory compliance.

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