Fed's Bowman Pushes 'Lighter Touch' Oversight For Lower-Risk AI Uses
By CU Today Staff —
BASEL, Switzerland—Federal Reserve Vice Chair for Supervision Michelle Bowman said financial regulators should take a proportional, risk-based approach to overseeing artificial intelligence, arguing that lower-risk AI applications deserve a "lighter supervisory and regulatory touch" while institutions using AI for more material functions should face stronger governance and controls.
Bowman delivered the remarks Tuesday during a virtual outreach event hosted by the Financial Stability Board.
Bowman said the FSB's draft report on Sound Practices for Responsible Adoption of Artificial Intelligence is intended to help financial institutions of all sizes deploy AI responsibly without stifling innovation. She noted the Federal Reserve System has monitored banks' use of AI for nearly a decade and has seen adoption expand across institutions of all sizes, with the goal of supporting responsible innovation while managing emerging risks.
A key theme of the report, Bowman said, is that governance and oversight should be driven by how AI is actually used and whether those applications are material to an institution's operations or legal and regulatory obligations. She emphasized that expectations should be proportional, with smaller institutions using less complex AI tools not subject to the same governance standards as large organizations deploying AI in more sophisticated or higher-risk applications.
Bowman encouraged banks, regulators and other stakeholders to provide feedback during the public comment period, particularly on whether the proposed sound practices are overly prescriptive or fail to adequately account for differences in institutional size, complexity and risk. She said the final report will be delivered later this year as part of the U.S. presidency of the G-20 and is intended to promote responsible AI innovation while maintaining appropriate safeguards for higher-risk uses.
Originally reported by CU Today.