Us Regulators Consider AI A Potential Risk To The Financial System
The U.S. financial system faces potential new risks if the rapid adoption of artificial intelligence (AI) is not properly overseen, according to a panel of regulators. The Financial Stability Oversight Council, led by Treasury Secretary Janet Yellen, highlighted these risks for the first time in its yearly financial stability report.
While recognising the potential for AI to bring innovation and efficiency to financial firms like banks, the council emphasised the need for careful supervision. The report mentioned that AI introduces specific risks, including those related to cybersecurity and model accuracy. It recommended that both companies and regulators enhance their expertise to monitor AI innovation and usage and identify emerging risks.
The complexity and opacity of some AI tools were acknowledged, making it challenging for institutions to explain or monitor them effectively. The report emphasised that a lack of understanding of AI tools could lead to biassed or inaccurate results. Furthermore, it pointed out that AI tools often rely on large external datasets and third-party vendors, posing privacy and cybersecurity risks.
Certain regulators, such as the Securities and Exchange Commission, are already examining how firms use AI. The report also noted recent executive orders aimed at mitigating AI risks. Despite the challenges, the report highlighted the resilience of the U.S. banking system while urging regulators to closely monitor uninsured bank deposits, which played a role in recent bank failures.