- US official body recognizes AI’s potential dangers alongside benefits.
- Concerns raised about vulnerabilities to hackers and unreliable AI predictions.
- Treasury Secretary calls for cautious integration with existing financial regulations.
Financial Stability Oversight Council (FSOC), the regulatory body established after the 2008 financial crisis, has officially recognized artificial intelligence (AI) as a risk to the U.S. financial system. The report, released on Thursday, emphasized the increasing use of AI in financial services, highlighting it as a “vulnerability” that demands ongoing monitoring.
While acknowledging the potential benefits of AI, such as cost reduction, improved efficiency, and enhanced accuracy, the FSOC also underscored the inherent risks associated with the technology. The use of AI in finance introduces concerns related to safety and soundness, including cybersecurity threats and model risks.
The FSOC emphasized the necessity of monitoring AI developments to ensure that oversight mechanisms evolve to “account for emerging risks” while simultaneously fostering efficiency and innovation in the financial sector. Authorities are urged to deepen their expertise and capacity to effectively monitor the field, reflecting the dynamic nature of AI applications in finance.
U.S. Treasury Secretary Janet Yellen, who chairs the FSOC, acknowledged the potential increase in AI adoption within the financial industry as it embraces emerging technologies. Yellen emphasized the council’s role in monitoring “emerging risks” associated with AI, highlighting the importance of responsible innovation while adhering to existing principles and rules for risk management.
The report comes in the wake of President Joe Biden’s executive order in October, which addressed AI’s implications for national security and discrimination. Globally, governments and academics have expressed concerns about the rapid pace of AI development, raising ethical questions surrounding individual privacy, national security, and copyright infringement.
A recent survey conducted by Stanford University researchers revealed that tech workers involved in AI research expressed concerns about their employers’ inadequate implementation of ethical safeguards, despite public pledges to prioritize safety.
As the financial industry continues to integrate AI into its operations, the FSOC’s recognition of AI as a potential risk signals a proactive stance in navigating the challenges and opportunities associated with this transformative technology.
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