Washington, D.C. – Policymakers should enable banks to pursue innovation in artificial intelligence and address examiner constraints that preclude them from doing so, BPI said today in response to a request for information from the White House Office of Science and Technology Policy, which is developing an Artificial Intelligence Action Plan.
What BPI is saying: “Safety and soundness in the banking system depends on harnessing the benefits of technology, not taking an overly rigid approach,” said Greg Baer, BPI President and CEO. “The most pressing question for bank regulators is not what risks AI poses, but what the risks are of failing to adopt it. Eschewing a beneficial technology simply because it is new would impose significant opportunity costs. Examination of AI tools should focus on risks that are material to a bank’s safe and sound operation and not disadvantage the use of innovative technology that solves problems.”
The background: The administration aims to encourage U.S. innovation in artificial intelligence, including by eliminating unnecessary regulatory barriers. This effort should take into account the cumulative effect of the regulatory and supervisory framework, which constrains banks’ ability to engage in emerging technologies, including AI.
How banks use AI: Artificial intelligence has several uses in the banking sector, including:
- Detecting and preventing fraud.
- Combating illicit finance and money laundering threats.
- Offering innovative services to customers
BPI is calling for 4 key considerations in federal policy actions on AI:
- Embracing technology: The administration should direct federal banking regulators to encourage, rather than discourage banks’ use of AI.
- Level playing field: The administration should ensure that banks can contribute to AI innovation and competition along with nonbank firms, without disproportionate regulatory roadblocks. For example, requirements governing third-party and “fourth party” vendor management require banks to act as quasi-regulators. Paired with strict supervisory scrutiny — which isn’t applied to tech companies — these added oversight expectations further deter banks from adopting emerging technology.
- Consistent and compatible: Any future AI policy steps affecting banks should be sector-specific, technology-neutral, principles- and risk-based, compatible with the current framework and subject to extensive industry engagement. An activity is not inherently riskier because it employs a particular technology.
- Public-private partnerships: The administration should continue to engage in public-private partnerships to advance AI.
To access a copy of the letter, please click here.
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About Bank Policy Institute.
The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.
Media Contacts
- Tara Payne, Bank Policy Institute, tara.payne@bpi.com
