The Financial Stability Oversight Council (FSOC), in collaboration with the Brookings Institution, commenced a conference on Artificial Intelligence (AI) and Financial Stability today. The event, held in Washington, D.C., gathered participants from both public and private sectors to discuss AI's evolving role in the financial system and its potential implications for U.S. financial stability.
In her keynote address, Secretary of the Treasury Janet L. Yellen underscored both opportunities and risks associated with AI in the financial sector. She stated that AI "when used appropriately, can improve efficiency, accuracy, and access to financial products." Yellen also referenced the "Council’s new Analytic Framework," published last November, which outlines potential risks posed by AI to the financial system. These include vulnerabilities stemming from the complexity and opacity of AI models, inadequate risk management frameworks for AI risks, and interconnections as many market participants rely on similar data and models. She emphasized Treasury’s ongoing research, analysis, and coordination efforts to better understand these risks and its plans for continued engagement with stakeholders.
Acting Comptroller Hsu delivered another keynote address focusing on systemic risk implications of AI in banking and finance. He described AI as both a useful tool and a potentially harmful weapon while highlighting accountability challenges associated with it. Hsu advocated for a shared responsibility framework to ensure AI safety.
Several panel discussions examined potential risks to financial stability posed by AI in financial services. They also discussed approaches to promoting safe adoption of AI by balancing innovation with appropriate risk management measures. Participants included representatives from technology firms, finance institutions, civil society organizations, as well as staff from FSOC member agencies.
The FSOC identified AI as a potential vulnerability within the financial system for the first time in its 2023 Annual Report. The report noted rapid adoption of innovative technologies by financial institutions in recent years and an increase in the use of AI within financial services. It highlighted both benefits and risks posed by AI and recommended that institutions deepen their expertise to monitor AI innovations effectively.
The conference will continue tomorrow at the Brookings Institution in Washington, D.C., with further details available on the conference website.
