Top US regulators view AI as a looming vulnerability for financial stability, underscoring Washington’s mounting concern over systemic dangers posed by the burgeoning technology. –Bloomberg.
Janet Yellen, the Treasury Secretary, on Thursday signaled that the watchdogs in the US could make artificial intelligence and its potential threats a top priority in the upcoming year.
President Joe Biden, in October, had signed an executive order to establish all the standards for privacy and security protection for the technology in what the White House termed as an important regulation.
During the meeting of the Financial Stability Oversight Council, which also had some of the heads of the Securities and Exchange Commission and the Federal Reserve, Yellen mentioned that the group should focus on monitoring all the developing technologies and their potential risks.
“This year, the council specifically identified the use of artificial intelligence in financial services as a vulnerability in the financial system,”
she said ahead of the release of the group’s annual report.
“Supporting responsible innovation in this area can allow the financial system to reap benefits like increased efficiency, but there are also existing principles and rules for risk management that should be applied.”
All the giants on Wall Street accepted AI this year, which added to their ranks with quantitative analysts and data engineers.
The potential impact that artificial intelligence could have on finance has spurged multiple warnings from senior regulators, which also included SEC chairman Gary Gensler and Michael Barr from the Federal Reserve.
In the annual report, the council outlined multiple risks that AI might introduce or increase at financial institutions, which includes its ability to use discriminatory bias when it comes to lending.
“A particular concern is the possibility that AI systems with explainability challenges could produce and possibly mask biased or inaccurate results,” the report said. “This could affect, but not be limited to, consumer protection considerations such as fair lending.”