Recognizing that AI presents promise and pitfalls, as a banking regulator, the Federal Reserve is committed to supporting banks’ efforts to develop and use AI responsibly to promote a safe, fair, and transparent financial services marketplace, said Lael Brainard, Federal Reserve governor, in a recent speech.
“As regulators, we are also exploring and understanding the use of AI and machine learning for supervisory purposes, and therefore, we too need to understand the different forms of explainability tools that are available and their implications. To ensure that society benefits from the application of AI to financial services, we must understand the potential benefits and risks, and make clear our expectations for how the risks can be managed effectively by banks. Regulators must provide appropriate expectations and adjust those expectations as the use of AI in financial services and our understanding of its potential and risks evolve,” she said in a written release of the speech.
To that end, the Federal Reserve is exploring whether additional supervisory clarity is needed to facilitate responsible adoption of AI, and Brainard noted the Fed wants to hear from a wide range of stakeholders – including financial services firms, technology companies, consumer advocates, civil rights groups, merchants and other businesses, and the public. The Federal Reserve has been working with the other banking agencies on a possible interagency request for information on the risk management of AI applications in financial services. It is appropriate to be starting with the academic community that has played a central role in developing and scrutinizing AI technologies, she added.