The Financial Stability Oversight Council (FSOC), chaired by U.S. Treasury Secretary Janet Yellen, has raised concerns in its annual financial stability report about the potential risks associated with the rapid adoption of artificial intelligence (AI) in the United States financial system. While acknowledging AI’s capacity for innovation and efficiency in financial institutions, the report underscores the importance of vigilant supervision in light of the swift technological advancements in the field.
The FSOC emphasized specific risks associated with AI, including cybersecurity and model risks. The report called for increased knowledge and capabilities among companies and regulators to effectively monitor AI innovation and usage, identifying emerging risks. It noted that certain AI tools are highly technical and complex, posing challenges for institutions in terms of explanation and monitoring.
Highlighting the potential oversight of biased or inaccurate results without a comprehensive understanding, the report stressed the need for companies and regulators to enhance their understanding of AI tools. Additionally, it pointed out that AI tools increasingly rely on extensive external data sets and third-party vendors, raising concerns about privacy and cybersecurity.
Multiple regulators, including the U.S. Securities and Exchange Commission (SEC) with a representative on the Financial Stability Oversight Council (FSOC), have conducted examinations into the utilization of AI by companies. Simultaneously, the White House has taken action by issuing an executive order aimed at addressing and mitigating AI-related risks.
On a global scale, Pope Francis voiced apprehensions about the potential threats posed by AI to humanity in a letter dated December 8. He called for an international treaty to ethically oversee the development of AI, cautioning against the emergence of a “technological dictatorship” without proper regulatory measures.
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