Existing Safeguards Encourage Responsible AI Innovation, but Neglect Risks from Nonbanks

Washington, D.C. — The Bank Policy Institute submitted a letter to the federal banking agencies today in response to questions the agencies raised in a request for information on artificial intelligence and machine learning. The letter discusses how these tools are deployed in everyday business practices and responds to the agencies’ questions on a range of policy topics, including the explainability of AI models, potential risks as they relate to cybersecurity and fair lending considerations.

“The benefits of AI and machine learning are being witnessed across every layer of a bank’s operations, from creating more personalized and accessible experiences for customers to identifying and preventing money laundering,” stated Stephanie Wake, Vice President of BITS — the technology policy division of BPI. “While these benefits continue to be realized, innovative new products are subject to existing laws and regulations to help ensure they are deployed safely and responsibly, which cannot be said for every other industry.”

Comprehensive regulatory requirements and laws already apply to banks who choose to leverage AI and machine learning, the letter indicates. While the capabilities of these tools continue to evolve, these safeguards ensure banks can effectively manage risks in collaboration with regulators. Rather than extinguishing innovation by subjecting a highly regulated industry to even more rigid directives, the letter recommends regulators equally apply existing safeguards to nonbanks, who are oftentimes heavily reliant on these tools, but are not required to meet the same examination or regulatory expectations that apply to banks.

The letter’s full range of recommendations includes:

  • Conduct a balanced assessment of the benefits and risks of AI in financial services;
  • Avoid creating or applying new regulatory expectations that may hinder progress in using this evolving technology;
  • Recognize that banks should have flexibility in determining how to assess AI models by adopting a risk-based approach to oversight of AI;
  • Ensure that existing regulations and guidance are applied consistently across banks and nonbanks engaged in financial services; and
  • Continue interagency coordination to ensure AI is used in a safe and sound manner.

To read a copy of the letter, please click here.

Additional Background:

In September 2019, BPI released a white paper analyzing the existing regulatory framework governing the use of AI in credit underwriting after soliciting feedback from a diverse range of stakeholders. In conjunction with the release of the report, BPI hosted an event on Capitol Hill during the 116th Congress that was widely attended by policymakers, academics and lawmakers, including House Financial Services Committee Task Force on Artificial Intelligence Chair, Representative Bill Foster (D-IL), and then-Ranking Member French Hill (R-AR).


About Bank Policy Institute.

The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth

Media Contact:

Austin Anton
Bank Policy Institute

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