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Yellen will warn of “significant risks” of AI in finance while recognizing “tremendous opportunities”
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Treasury Secretary Janet Yellen is prepared to warn that the use of artificial intelligence (AI) in finance carries “significant risks”, even if it benefits financial companies, according to excerpts from a speech she is expected to give on Thursday.
Yellen is expected to speak at a AI conference hosted by the Financial Stability Oversight Council (FSOC) and the Brookings Institution, where it will recognize that AI “offers tremendous opportunities for the financial system” while underlining that AI-related risks are at the forefront of the financial system’s agenda. regulatory board.
“For many years, AI’s predictive capabilities have supported forecasting and portfolio management,” Yellen says in the excerpts. “AI’s ability to detect anomalies has contributed to efforts to combat fraud and illicit financing. Many customer support services have been automated. In these and many other use cases, we have seen that AI, when used appropriately, can improve efficiency, accuracy, and access to financial products.”
“Specific vulnerabilities may arise from the complexity and opacity of AI models; of inadequate risk management frameworks to account for AI risks; and the interconnections that emerge as many market participants rely on the same data and models,” she says.
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Treasury Secretary Janet Yellen will give a speech warning about the dangers of AI in finance, as well as its benefits. (Drew Angerer/AFP via Getty Images/Getty Images)
Yellen goes on to explain in her prepared remarks that if many market participants trust the same AI models and dataas well as cloud service providers, could reinforce existing biases or create new ones that impact decision-making in financial markets.
“Concentration among vendors that develop models, provide data, and provide cloud services can also introduce risks, which could amplify existing risks from third-party vendors. And insufficient or flawed data could also perpetuate or introduce new biases into financial decision-making,” she explains.
Despite these challenges, she says AI-based tools can help expand access to financial services while making them more affordable. affordable for consumers.
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Yellen says there are concentration risks if too many financial market players rely on the same AI models and data. (Alex Wong/Getty Images/Getty Images)
“Advances in natural language processing, image recognition and generative AI, for example, create new opportunities to do financial services less expensive and easier to access”, says Yellen in the excerpts. The secretary also notes that the IRS is using AI to “improve fraud detection.”
Yellen says financial regulators members of the FSOC – which is led by the Treasury Department and also includes the Federal Reserve, among other regulators – “will also continue to support efforts to build supervisory capacity to better understand associated risks,” notably through the use of analytics. scenarios.
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Yellen says AI is high on financial regulators’ agenda. (Drew Angerer/Getty Images/Getty Images)
“Scenario analysis, often used by companies and governments to understand opportunities and risks in the context of uncertainty, can also be beneficial,” she states in the excerpts. “Given how quickly AI technology is developing, with rapidly evolving potential use cases for financial firms and market participants, scenario analysis could help regulators and companies identify potential future vulnerabilities and inform what we can do to increase resilience.”
FOX Business’ Edward Lawrence and Reuters contributed to this report.