Michelle W Bowman: Artificial intelligence in the financial system
Speech by Ms Michelle W Bowman, Member of the Board of Governors of the Federal Reserve System, at the 27th Annual Symposium on "Building the Financial System of the 21st Century: An Agenda for Japan and the United States", Washington DC, 22 November 2024.
The views expressed in this speech are those of the speaker and not the view of the BIS.
Discussions of artificial intelligence (AI) inevitably center on two main points: risks and benefits. Both of these can be frustratingly vague and amorphous. Proponents of AI project its widespread adoption will be as momentous as the industrial age-radically improving efficiency, increasing labor productivity, and changing the world economy. Skeptics largely focus on the risks, noting that it may introduce new and unpredictable variables into the economy and the financial system, including new forms of cyber-risk and fraud.
It would be impossible to predict what the future holds for AI, or how its use and impact will evolve over time. But as the technology continues to mature, as new use cases evolve, and it is rolled out more broadly, we will almost certainly be surprised by how it is ultimately used.
Looking at the financial industry-specific implications of AI, it is helpful to consider not only how it may change the financial system, but also how regulatory frameworks should respond to this emerging technology. Are the existing frameworks sufficient? If not, how can regulators best balance the risks AI may pose to bank safety and soundness and financial stability with the need to allow for continued innovation?
Broader availability of generative AI and large language models have created headlines and spiking stock prices, but the financial services sector has been using AI for some time. Over time, it has become clear that AI's impact could be far-reaching, particularly as the technology becomes more efficient, new sources of data become available, and as AI technology becomes more affordable.