A panel of regulators warned that the rapid adoption of artificial intelligence (AI) could pose new risks to the United States financial system if the technology is not adequately supervised.
The Financial Stability Oversight Council (FSOC), which is comprised of top financial regulators and chaired by U.S. Treasury Secretary Janet Yellen, flagged the risks posed by AI for the first time in its annual financial stability report published on Dec. 14.
FSOC acknowledged AI’s potential to drive innovation and efficiency in financial institutions, but it stressed the need for companies and regulators to remain vigilant due to the swift technological advancements.
In its annual report, the organization emphasized that AI carries specific risks, such as cybersecurity and model risks. It suggested that companies and regulators enhance their knowledge and capabilities to monitor AI innovation and usage and identify emerging risks.
According to the report, specific AI tools are highly technical and complex, posing challenges for institutions to explain or monitor them effectively. The report warns that companies and regulators may overlook biased or inaccurate results without a comprehensive understanding.
The report also highlighted that AI tools increasingly depend on extensive external data sets and third-party vendors, bringing forth privacy and cybersecurity concerns.
Certain regulators, including the U.S. Securities and Exchange Commission — whose chair sits on the FSOC — have examined firms’ AI usage. The White House has also issued an executive order to address and reduce AI risks.
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Pope Francis, in a letter on Dec. 8, expressed concerns about the potential threats of AI to humanity. He advocates for an international treaty to ethically regulate AI development, cautioning against the risk of a “technological dictatorship” without proper controls.
Tech figures like Elon Musk and Steve Wozniak have also voiced concerns about the swift progress of AI. Over 2,600 tech leaders and researchers, including Musk and Wozniak, signed a petition in March 2023, urging a “pause” in AI development. They emphasized the potential “profound risks to society and humanity” posed by AI advancements surpassing GPT-4.
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