US regulators have for the first time identified the use of artificial intelligence as a vulnerability in the financial system, according to a report published on Thursday.
There is a need to monitor “rapid developments in AI, including generative AI, to ensure that supervisory structures keep up with or stay ahead of emerging risks to the financial system,” the Supervisory Board of the Financial Stability Board (FSOC) in its annual report.
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Generative AI software can quickly produce text, images and audio from simple commands in everyday language.
“As financial institutions continue to evaluate and adopt innovative technologies, the adoption of AI could accelerate,” Treasury Secretary Janet Yellen, who chairs the board, said Thursday.
Speaking at a council meeting, he added: “Supporting responsible innovation in this area can allow the financial system to reap benefits such as greater efficiency, but there are also existing principles and rules for risk management that are “must apply”.
The FSOC was created in the wake of the 2008 global financial crisis, and other members include the chairmen of the Federal Reserve as well as the Securities and Exchange Commission.
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The annual report found that the US financial system is resilient and the banking system remains sound, despite turmoil earlier this year that involved the collapse of some regional US lenders. For now, the board supports plans to review whether capital measures adequately reflect an institution’s capacity. to absorb losses and recommended that banking agencies closely monitor uninsured deposit levels.
He also called for financial institutions and regulators to improve their ability to monitor AI innovation and identify emerging risks.
Other recommendations include boosting data collection so authorities can monitor climate-related financial threats, as well as passing legislation to regulate stablecoins.
Stablecoins are cryptocurrencies that are typically pegged to stable assets such as the US dollar to avoid drastic price movements.
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