US regulators have identified the use of artificial intelligence as a vulnerability in the financial system for the first time, according to a report released on Thursday.
There is a need to monitor “rapid developments in AI, including generative AI, to ensure that oversight structures keep up with or stay ahead of emerging risks to the financial system,” said the Financial Stability Oversight Council (FSOC) in its annual report.
Generative AI software rapidly creates text, images, and audio based on simple commands expressed in everyday language.
“As financial institutions continue to evaluate and adopt innovative technologies, uptake of AI could accelerate,” said Treasury Secretary Janet Yellen, who chairs the council, on Thursday.
Speaking at a council meeting, she added: “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.”
Established in response to the 2008 global financial crisis, the FSOC comprises various members, including the chairs of the Federal Reserve and the Securities and Exchange Commission.
The yearly report affirms the resilience of the US financial system, highlighting the soundness of the banking system, even in the face of recent challenges, such as the collapse of certain regional lenders earlier this year.
At present, the council endorses the review of capital measures to ensure they accurately represent an institution’s capacity to absorb losses. Additionally, it suggests close monitoring of uninsured deposit levels by banking agencies.
The council urges financial institutions and regulators to enhance their capabilities in monitoring AI innovation and identifying emerging risks.
Additional recommendations involve advocating for data collection to enable authorities to monitor financial threats related to climate change. Moreover, the council suggests passing legislation to regulate stablecoins—cryptocurrencies usually tied to stable assets like the US dollar to prevent significant price fluctuations.
