Excerpts from speech by Fed Governor Lael Brainard at Fintech and the New Financial Landscape, Philadelphia, Pennsylvania, November 13, 2018
Although it is still early days, it is already evident that the application of artificial intelligence (AI) in financial services is potentially quite important and merits our attention. Through our Fintech working group, we are working across the Federal Reserve System to take a deliberate approach to understanding the potential implications of AI for financial services, particularly as they relate to our responsibilities. In light of the potential importance of AI, we are seeking to learn from industry, banks, consumer advocates, researchers, and others, including through today’s conference. I am pleased to take part in this timely discussion of how technology is changing the financial landscape.
Perhaps one of the most important early lessons is that not all potential consequences are knowable now — firms should be continually vigilant for new issues in the rapidly evolving area of AI. Throughout the history of banking, new products and processes have been an area where problems can arise. Further, firms should not assume that AI approaches are less susceptible to problems because they are purported to be able to “learn” or less prone to human error. There are plenty of examples of AI approaches not functioning as expected — a reminder that things can go wrong. It is important for firms to recognize the possible pitfalls and employ sound controls now to prevent and mitigate possible future problems.
For our part, we are still learning how AI tools can be used in the banking sector. We welcome discussion about what use cases banks and other financial services firms are exploring with AI approaches and other innovations, and how our existing laws, regulations, guidance, and policy interests may intersect with these new approaches. When considering financial innovation of any type, our task is to facilitate an environment in which socially beneficial, responsible innovation can progress with appropriate mitigation of risk and consistent with applicable statutes and regulations.
As with other technological advances, AI presents regulators with a responsibility to act with thoughtfulness and perspective in carrying out their mandates, learning from the experience in other areas. As we move ahead in exploring the policy and regulatory issues related to artificial intelligence, we look forward to collaborating with a broad array of stakeholders.