Senior bank regulators stated that financial institutions’ utilization of artificial intelligence ought to have risk controls in place to manage potential disadvantages, suggesting that old regulations may be imposed on the new technology.
Officials from the Federal Reserve Board of Governors and Office of the Comptroller of the Currency cautioned that besides machine learning guidance from federal bank regulators, firms violate the terms of existing standards.
“There’s a lot of existing guidance. It doesn’t need to be AI-labeled to be applicable.”Kevin Greenfield, the deputy comptroller for operational risk policy at the OCC.
Financial authorities in the US have been grappling with how to deal with banks and other institutions’ expanding use of artificial intelligence, a technology that has been used in diverse applications like fraud detection and product policies. Five regulators, along with the OCC and the Federal Reserve, requested firms for information regarding their use of AI in 2021, but no broad guidance has been released so far.
Considering the absence of fresh guidelines, David Palmer, a senior supervisory financial analyst at the Federal Reserve, argues in the same panel discussion that institutions should have risk management strategies.
“If they don’t have the appropriate governance, risk management and controls for AI, they shouldn’t use AI.”David Palmer
Mr. Palmer believes that a broad range of AI-related rules will never be issued by banking regulators and that the agencies will instead release more detailed updates on their reasoning.
“There could be a series of things issued…as we all learn more. Things are moving so quickly and we’re all learning a lot.”David Palmer
Mr. Palmer added that regulators have ordered financial organizations to go through rational grounds for AI uses.
Regulators at the Federal Reserve started to investigate how institutions are utilizing AI, though these investigations have primarily served to educate the regulators rather than yield the types of conclusions that would come from a serious probe, according to Mr. Palmer.
Facilities should retain a “healthy degree of skepticism” regarding the technology and make sure they have enough supervision, he said.
Information from The Wall Street Journal
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