The Bank Policy Institute (BPI) has called for a more proactive regulatory approach to artificial intelligence (AI) in the banking sector. In a letter responding to the White House Office of Science and Technology Policy’s (OSTP) request for information on AI regulatory reform, BPI argued that current oversight frameworks are outdated and hinder banks’ ability to deploy new technologies that could protect against fraud, cyberattacks, and financial crime.
According to BPI, existing regulations require banks to undergo lengthy model risk reviews before introducing any new AI tools, even for low-risk applications. This process can delay adoption at a time when criminals are increasingly using AI for illicit activities such as money laundering and fraud.
“Artificial intelligence is causing a seismic shift in society, and it requires an equally fundamental shift in bank oversight: one that acknowledges the risk to the banking system from inaction. Bank supervision in recent decades has taken a gradual approach to technology, but the rapid, large-scale adoption of AI leaves no time to hesitate. Banking agency principals and the White House have wisely chosen to break barriers to technological innovation in the banking sector, and reform of supervisory requirements that impede bank AI adoption would represent a sensible next step in these efforts,” said Heather Hogsett, Executive Vice President and Head of BITS at BPI.
BPI recommended several changes for policymakers considering updates to regulations affecting banks’ use of AI. These include encouraging AI adoption within banks while also recognizing the risks associated with not innovating; narrowing Model Risk Management Guidance so it does not apply to most uses of AI except those related to regulatory capital and liquidity calculations; establishing consistent federal standards for AI deployment; and ensuring parity between banks and nonbank competitors or vendors.
The organization emphasized that failing to modernize oversight frameworks could pose greater risks than adopting new technologies. It stated that updating banks’ capabilities in areas like fraud detection, illicit finance prevention, and cybersecurity is critical as adversaries continue advancing their own use of AI tools.
The OSTP’s request follows recommendations from the White House’s July 2025 AI Action Plan aimed at promoting U.S. innovation and responsible adoption of artificial intelligence across sectors.
BPI describes itself as a nonpartisan group representing universal banks, regional banks, and major foreign banks operating in the United States. The institute conducts research on regulatory policy issues relevant to financial services, including cybersecurity and fraud prevention.