Read the original full article from ICBA here.
Here is a brief summary of the article:
- Federal banking regulators have decided to apply restrictions to the use of artificial intelligence (AI) as opposed to creating new rules.
- The primary concerns associated with AI usage are cybersecurity threats, fair financing underwriting risks, and third-party provider control.
- Banks that utilize AI should take the time to assess the FDIC’s Supervisory Guidance on Model Risk Management.
- If an AI-based underwriting system discriminates against applicants based on their race or gender, it could be violating fair lending rules.
- While Federal Reserve Vice Chairman Michael Barr recognizes the potential benefits of AI underwriting, he also warns of the risks of violating fair lending laws.
- The Consumer Financial Protection Bureau cautions that chatbots may violate consumer financial protection rules if they provide consumers with erroneous or misleading information.
- Community banks should closely monitor AI development to ensure they are compliant with regulations and avoid potential reputational damage.
