Policymakers are being urged to allow banks to innovate with artificial intelligence and address constraints that prevent them from doing so, according to the Bank Policy Institute (BPI). This comes in response to a request for information from the White House Office of Science and Technology Policy, which is working on an Artificial Intelligence Action Plan.
Greg Baer, BPI President and CEO, stated: “Safety and soundness in the banking system depends on harnessing the benefits of technology, not taking an overly rigid approach.” He emphasized that the primary concern for bank regulators should be understanding the risks of not adopting AI rather than focusing solely on its potential risks. Baer warned against dismissing beneficial technology simply because it is new, as this could lead to significant missed opportunities.
The current administration aims to foster U.S. innovation in AI by removing unnecessary regulatory barriers. The existing regulatory framework has been noted as a constraint on banks' ability to engage with emerging technologies like AI.
In banking, AI is used for detecting and preventing fraud, combating illicit finance and money laundering threats, and offering innovative services to customers. BPI has proposed four key considerations for federal policy actions concerning AI:
1. Embracing technology: Federal banking regulators should encourage banks' use of AI.
2. Level playing field: Banks should be able to contribute to AI innovation alongside nonbank firms without facing disproportionate regulatory challenges.
3. Consistent and compatible: Future AI policies affecting banks should be sector-specific, technology-neutral, principles- and risk-based, compatible with current frameworks, and involve extensive industry engagement.
4. Public-private partnerships: Continued engagement in public-private partnerships is recommended to advance AI.
The Bank Policy Institute represents universal banks, regional banks, and major foreign banks operating in the United States. It conducts research on regulatory issues and advocates for the financial services industry regarding cybersecurity and other security concerns.
For more information or access to their letter submission, contact Tara Payne at tara.payne@bpi.com.