Treasury Secretary Janet Yellen warned on Thursday that artificial intelligence (AI) could pose “significant risks” to the financial system.
Speaking at a conference on AI and financial stability, Yellen said the “complexity and opacity” of AI models, “inadequate” risk management frameworks and the “interconnectedness” that comes from using the same data and models could create vulnerabilities.
Risks could also arise from concentration among vendors developing the models and providing data and cloud services, as well as “insufficient or incomplete data,” she added.
“The enormous opportunities and significant risks associated with financial firms’ use of AI have propelled the issue to the top of the Treasury Department and the Financial Stability Oversight Council’s agenda,” Yellen said at an event co-hosted by the council and the Brookings Institution.
In his remarks, the Treasury Secretary announced plans to launch a formal public request for information on the “current uses, opportunities and risks of AI in the financial services sector.”
The Treasury Department’s Federal Insurance Office will also be holding a roundtable on the use of AI in the insurance sector, she said.
Like Yellen, Securities and Exchange Commission Chairman Gary Gensler has similarly warned about the risks that centralized AI poses to the financial system.
During a fireside chat earlier this year, Gensler said he believes there will likely be just a handful of large base models and data aggregators, creating a “monoculture” in which hundreds or even thousands of financial professionals rely on the same data and models.
“Diversity of models and diversity of data sources. Otherwise you have a very fragile system,” Gensler said at the time.
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