U.S. banking regulators announced on Monday they were soliciting public input on the growing use of artificial intelligence by financial institutions.
In a joint statement, the regulators said they wanted feedback on the use of the technology by banks to police fraud, underwrite loans and for other purposes, and what perks and challenges it presents.
The query was not connected to any specific regulatory project, but rather regulators said they were soliciting public comment to identify any areas where it may be helpful for agencies to clarify existing rules to address the use of AI.
“The agencies support responsible innovation by financial institutions,” the regulators said in the solicitation. “With appropriate governance, risk management, and compliance management, financial institutions’ use of innovative technologies and techniques, such as those involving AI, has the potential to augment business decision-making, and enhance services available to consumers and businesses.”
The query from the Federal Reserve, Consumer Financial Protection Bureau, and other federal financial regulators underscores the growing prevalence of AI in the financial sector, what it could mean for lenders and borrowers alike.
The wide-ranging query asks for responses on traditional bank concerns like cybersecurity and fair lending, as well as AI-specific issues such as how to manage models that dynamically update in response to new data and “overfitting,” which is when idiosyncracies in data used to train an algorithm may not match an entire population.
In 2018, Fed Vice Chair Randal Quarles, the central bank’s top regulatory official, said the central bank was closely watching the use of machine learning by banks, and wondered if “more specialized” regulatory responses would be needed.