The rapid adoption of artificial intelligence (AI) could create new risks for the US financial system if the technology is not properly supervised, regulators have warned.
The Financial Stability Oversight Council (FSOC), which comprises top financial regulators and is chaired by Treasury Secretary Janet Yellen, flagged the risks posed by AI for the first time in its annual financial stability report.
“AI has the potential to spur innovation and drive efficiency, but its use in financial services requires thoughtful implementation and supervision to manage potential risks,” the FSOC warned.
"AI can introduce certain risks, including safety and soundness risks like cyber and model risks," the group said in its annual report, adding it recommended firms and their regulators "deepen expertise and capacity to monitor AI innovation and usage and identify emerging risks".
The regulators also highlighted the growing role of nonbanks and private credit as meriting close attention, and said financial institutions and regulators should continue to try to better understand risks stemming from climate change.
Some AI tools can be hugely technical and opaque, making it hard for institutions to explain or properly monitor them for shortcomings.
If companies and regulators do not fully understand AI tools, then it is possible they could miss biased or inaccurate results, the report said.