The Financial Stability Oversight Council says new technologies bring both “security and soundness risks” and benefits.
Financial regulators in the United States have identified artificial intelligence (AI) as a risk to the financial system for the first time.
In its latest annual report, the Financial Stability Oversight Council said the increasing use of AI in financial services was a “vulnerability” that should be monitored.
While AI promises to reduce costs, improve efficiency, identify more complex relationships and improve performance and accuracy, it can also “introduce certain risks, including security and reliability risks such as cyber and model risks,” the FSOC said in its annual report released on Thursday.
The FSOC, which was set up in the wake of the 2008 financial crisis to identify excessive risks in the financial system, said developments in AI should be monitored to ensure supervisory mechanisms “take into account emerging risks” while promoting “efficiency and innovation”.
Authorities also need to “deepen their expertise and capacity” to monitor the field, the FSOC said.
U.S. Treasury Secretary Janet Yellen, chair of the FSOC, said AI adoption could increase as the financial industry adopts new technologies and that the council will play a role in monitoring “emerging risks.”
“Supporting responsible innovation in this area can enable the financial system to achieve benefits such as greater efficiency, but there are also existing risk management principles and rules that should be applied,” Yellen said.
US President Joe Biden issued a sweeping executive order on AI in October, focusing primarily on the technology's potential impact on national security and discrimination.
Governments and scientists around the world have expressed concern about the rapid pace of AI development, given ethical issues that include individual privacy, national security and copyright infringement.
In a recent survey by researchers at Stanford University, engineers involved in AI research warned that their employers were not implementing ethical safeguards despite their public pledges to prioritize safety.
Last week, European Union policymakers agreed on a landmark law requiring AI developers to disclose data used to train their systems and test high-risk products.
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