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The
Financial Stability Oversight Council, which comprises top
financial regulators and is chaired by Treasury Secretary Janet
Yellen, flagged the risks posed by AI for the first time in its
annual financial stability report.
While the group said AI could spur innovation or efficiencies at
financial firms like banks, the rapidly advancing technology
requires vigilance from both the companies and their watchdogs.
"AI can introduce certain risks, including safety and soundness
risks like cyber and model risks," the group said in its annual
report published Thursday, adding it recommended firms and their
regulators "deepen expertise and capacity to monitor AI
innovation and usage and identify emerging risks."
The panel also flagged the growing role of nonbanks and private
credit as meriting close attention, and said financial
institutions and regulators should continue to try to better
gauge risks stemming from climate change.
Some AI tools can be hugely technical and opaque, making it hard
for institutions to explain or properly monitor them for
shortcomings. If companies and regulators do not fully
understand AI tools, then it is possible they could miss biased
or inaccurate results, the report said.
It also noted that AI tools increasingly rely on large external
datasets and third-party vendors, which pose their own privacy
and cybersecurity risks.
Some regulators including the Securities and Exchange
Commission, which sits on the panel, are scrutinizing how firms
use AI, while the White House recently issued an executive order
aimed at mitigating AI risk.
Elsewhere in the report, the FSOC noted that the U.S. banking
system remains resilient, despite large bank failures this year.
But it urged regulators to keep a close eye on uninsured bank
deposits, the rapid flight of which triggered the failures.
(Reporting by Pete Schroeder; Editing by David Gregorio)
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