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Strengthening our understanding of AI’s potential risks and rewards

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Editor's note:

This blog post was written for the “2024 Conference on Artificial Intelligence & Financial Stability” on June 6-7, 2024.

Artificial intelligence (AI) holds extraordinary potential for both promise and peril, as President Biden noted in his Executive Order on AI. Experts in financial regulation and financial crises know all too well how important it is to monitor rapidly emerging technologies that could pose risks to the financial services system. Against this backdrop, the Financial Stability Oversight Council (FSOC) and the Brookings Institution are bringing together leaders across government, finance, technology, and academia to discuss how best to address AI from a financial stability perspective.

The FSOC “was created to provide collective accountability for identifying risks and responding to emerging threats to financial stability.”  The use of AI in financial services was identified in the FSOC’s 2023 annual report for the first time as a vulnerability in the financial system.  The report highlights the potential benefits of AI in financial services, including increased efficiency and innovation. Current use cases for AI in financial services include fraud prevention and detection, customer service, document review, and credit assessments. These applications can enhance productivity but also exacerbate existing risks and introduce new risks to the financial system, such as cybersecurity risks, the lack of explainability of models, and consumer compliance risks. In its report, the FSOC recommended that “financial institutions, market participants, and regulatory and supervisory authorities further build expertise and capacity to monitor AI innovation and usage and identify emerging risks.” Hosting this conference is one way the FSOC is fulfilling this recommendation.

The Brookings Institution’s mission is “to conduct in-depth, nonpartisan research to improve policy and governance at the local, national, and global levels.” AI and emerging technologies cut through multiple areas of Brookings research, including economic studies and regulatory policy. Bringing together leaders at this conference is one method by which Brookings promotes effective solutions to challenges posed by AI.

Together, the FSOC and Brookings hope this conference strengthens our collective understanding of AI’s potential risks and rewards. Thoughtful and open dialogue among leaders from multiple vantage points can help policy makers, industry leaders, and academics better harness the potential of AI while guarding against its risks.

We look forward to starting such a conversation at our event and making progress toward the goal of a stable, strong financial system for all Americans.

Authors

  • Acknowledgements and disclosures

    The Brookings Institution is financed through the support of a diverse array of foundations, corporations, governments, individuals, as well as an endowment. A list of donors can be found in our annual reports published online here. The findings, interpretations, and conclusions in this report are solely those of its author(s) and are not influenced by any donation.