Treasury Secretary Janet Yellen said the use of artificial intelligence was “significant [financial] Despite appearing to benefit financial institutions, Fox News Digital.
Fox News has obtained excerpts from a speech Yellen is scheduled to deliver on Thursday at an AI conference hosted by the Financial Stability Oversight Council and the Brookings Institution, where she will acknowledge that AI “presents tremendous opportunities for the financial system” but still carries risks.
“Risks also arise from concentration among vendors developing models, providing data and delivering cloud services, potentially increasing the risk to existing third-party providers.”
“For many years, AI’s predictive capabilities have supported forecasting and portfolio management,” Yellen said in the excerpt. “AI’s anomaly detection capabilities have contributed to efforts to combat fraud and illicit funds. Many customer support services are automated. In these and many other use cases, we know that AI, when used properly, can improve efficiency, accuracy and access to financial products.”
“Particular vulnerabilities may arise due to the complexity and opacity of AI models, the inadequacy of risk management frameworks that take AI risks into account, and the interconnectedness that arises when many market participants rely on the same data and models,” she continued.
Yellen also said the “complexity and opacity” of AI models, as well as “inadequate” risk management frameworks arising from the same data and models, could lead to vulnerabilities. The Hill.
She further noted that when too many market participants rely on the same AI models and data, it could reinforce existing biases or create new ones that could have a major impact on financial markets.
“Concentration among vendors that develop models, provide data and deliver cloud services also introduces risks and can amplify risks from existing third-party providers. And insufficient or incomplete data could perpetuate or introduce new biases in financial decision-making,” Yellen said.
Yellen said that despite significant challenges, AI-based tools could go a long way in expanding access to financial services, potentially making them more affordable for everyday consumers.
“For example, advances in natural language processing, image recognition, and generative AI create new opportunities to make financial services cheaper and more accessible,” Yellen said. Additionally, she said the IRS is using AI for “enhanced fraud detection.”
“Scenario analysis, which businesses and governments often use to understand opportunities and risks in uncertain situations, may also be useful,” she continued.
“Given that AI technologies are developing rapidly and potential use cases for financial institutions and market participants are rapidly evolving, scenario analysis could help regulators and firms identify potential future vulnerabilities and inform what they can do to become more resilient.”
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