For the first time, US regulators have identified the use of artificial intelligence (AI) as a vulnerability in the financial system. This comes as AI is increasingly being adopted by financial institutions, and there is concern that it could pose risks to the system.
The Financial Stability Oversight Council (FSOC) released a report on Thursday that identified AI as a risk. The report said that “rapid developments in AI, including generative AI, could pose emerging risks to the financial system.”
Generative AI is a type of AI that can be used to create new content, such as text, images, and audio. It is a powerful tool that can be used for a variety of purposes, but it also has the potential to be misused.
“As financial institutions continue to evaluate and adopt innovative technologies, uptake of AI could accelerate,” said Treasury Secretary Janet Yellen, who chairs the FSOC.
Yellen added that “supporting responsible innovation in this area can allow the financial system to reap benefits like increased efficiency, but there are also existing principles and rules for risk management that should be applied.”
The FSOC was created in the wake of the 2008 global financial crisis. It is tasked with identifying and mitigating risks to the financial system.
The FSOC’s report made some recommendations, including:
- Financial institutions and regulators boost their ability to monitor AI innovation and identify emerging risks.
- That data collection be pushed for so that authorities can monitor climate-related financial threats.
- That legislation be passed allowing stablecoins to be regulated.
Stablecoins are cryptocurrencies that are typically pegged to stable assets such as the US dollar to prevent drastic movements in prices.
The FSOC’s report is a reminder that AI is a powerful tool that can be both beneficial and risky. It is important for financial institutions and regulators to be aware of the risks posed by AI and to take steps to mitigate them.
