Insurance in the round: Innovation, growth and trust

Even more so at a moment where we are reaching some crossroads on long-term direction.

We run a financial system based on international standards and rules - rules we've always played a big leadership role in shaping.

But the rules of the international order have clearly changed.

At TheCityUK's conference in the summer, I asked - what kind of market do we want to be?

I am seeing growing thoughtfulness in industry about how we should go about our job.

Take AI.

Debates about potential winners and losers of AI are driving share prices ups and downs in subsector after subsector of financial services.

You are some of the biggest investors in technology in the UK. You know the practical reality: at market speed, you can't have a human approving every decision.

So the question becomes: what does good look like when you can't always have a human in the loop, or even able to understand why certain trading decisions are taken or strategies pursued?

I don't think there's a one-size-fits-all approach to this. And we know with innovation there will be bumps in the road.

The answer will often need to be tailored to specific use cases. The controls you need for a trading algorithm are different from those you'd need for a chatbot.

But there are common aspects. We're seeing successful firms thinking about the risks and controls at all stages.

Beforehand: What are the key risks, and what guardrails do we need to mitigate them?

During: How are we monitoring outcomes to know when models behave unexpectedly? And what oversight and safeguards will mean we can respond quickly to put it right?

Afterwards: How can we avoid model drift?

No one organisation has all the answers yet. We're all still learning.

That's why we're doing extensive and proactive work with firms to inform our regulatory approach.

There are multiple routes for industry to engage with us: Innovation Pathways, our Regulatory Sandbox, our AI Supercharged Sandbox.

And through our AI Live Testing - specifically intended to get firms over the line to deployment in live markets.

One message for this room: we'd like to see more wholesale trading firms using those routes. You are under-represented relative to others, so please do engage.

The priority for us all has to be learning quickly, with the right guardrails, to safely scale what works and so maintain our competitive edge.

Let me say a few words about crypto.

Many of you are seeing the opportunities - trading volumes in crypto ETPs have grown considerably in the last couple of years. New products emerging all the time.

But there is widespread recognition that it's a riskier form of investment. Volatile, difficult to value, with real security risks.

So we need a strong and sustainable framework in place that supports informed participation. On the risks, as well as potential gains.

We'll be setting out our crypto framework in early summer, before the regulatory gateway opens in September.

And we're actively supporting innovation - including on stablecoins, tokenisation of funds, and through lifting the ban on retail access to crypto ETNs.

But we have to be honest that this market is unlike any other. We may need to tweak our rules and develop new approaches at pace.

Like we did in October - the market and regulatory landscape had evolved, so we lifted the ban on retail access to certain crypto ETNs as a result.

So we will stay flexible, including considering where we might apply different approaches to wholesale firms than those directly serving consumers.