US Regulators Step Up Scrutiny of AI Use by Banks

US banking regulators are increasing scrutiny of how financial institutions use artificial intelligence, with a particular focus on data access, risk management, customer privacy and reliance on external technology providers.

Banks have expanded their use of AI in recent years, deploying the technology in areas ranging from virtual assistants and regulatory compliance to credit assessments. As adoption grows, regulators are becoming increasingly concerned about cyber threats, fraud risks and the potential misuse of customer data.

During supervisory reviews, the Office of the Comptroller of the Currency and the Federal Reserve are paying particular attention to how banks use AI in lending decisions, customer verification and sanctions screening.

Regulators are also examining the safeguards banks have in place, including so-called “kill switches” that allow AI systems to be shut down if necessary. In addition, supervisors are assessing how financial institutions oversee third-party technology providers and how prepared they are to respond to system failures.

For now, regulators are not planning new rules. Instead, they are seeking a better understanding of how AI is being deployed across the banking sector and what risks it may pose.

According to Federal Reserve officials, it remains unclear whether existing risk-management frameworks are sufficient to address future challenges posed by artificial intelligence.

(reuters, bak)