Treasury Secretary Says AI is Top Priority

Secretary of the Treasury, Janet Yellen, reviewed the opportunities and risks associated with the use of AI in the financial sector and said the issue has "move[d] toward the top of Treasury's and the Financial Stability Oversight Council’s ("FSOC") agendas." 

At the Financial Stability Oversight Council Conference on AI and Financial Stability, Ms. Yellen highlighted the development of AI in financial services, from forecasting and portfolio management, to detecting anomalies to catch fraud, to recent advances in natural language processing, image recognition and generative AI which can reduce costs and ease access. Citing FSOC's "Analytic Framework," she also described emerging vulnerabilities and risks from these developments, including the complexity and opacity of AI models, inadequate risk management frameworks, interconnections among market participants that rely on the same data and models, third-party service provider risks and insufficient and faulty data. (See related coverage.) 

Ms. Yellen highlighted key Treasury initiatives, including: (i) continuing stakeholder engagement to improve understanding of AI including through a formal public request for information (see related coverage), (ii) the consistent and continuous monitoring of AI's impact on financial stability, (iii) promotion of dialogue among regulators by FSOC to facilitate the exchange of information, (iv) continuing efforts to build supervisory capacity to better understand associated risks (noting the use of scenario analysis).