Treasury pushing for ‘robust’ use of AI in banking, but in a ‘gradual’ way

Source Domain: fedscoop.com

The Treasury Department is looking to push artificial intelligence adoption across the financial services sector in a “gradual” but ultimately “robust” way, leaning into public-private partnerships and potentially AI sandboxes, Secretary Scott Bessent told Congress this week.

Appearing before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday, Bessent was teed up by several lawmakers to address AI priorities spelled out in the Financial Stability Oversight Council’s Annual Report to Congress.

The report, published by the Treasury Department last December, listed “Harnessing Artificial Intelligence to Promote Financial Stability” as one of FSOC’s four key areas of focus. It recommended that agencies use FSOC’s AI working group to identify “regulatory impediments” to financial institutions adopting AI.

Sen. Mike Rounds, R-S.D., co-chair of the Senate AI Caucus, asked Bessent what he views as the “biggest impediments” preventing banks from “adopting AI responsibly, especially for compliance, fraud detection and risk management.”

Bessent said there’s still “a great amount of learning to do” when it comes to AI, so it’s been the approach so far to have the regulatory agencies work “with our private partners to implement in a gradual way” that leads to “robust usage of AI.”

“AI can be a great tool,” the secretary added, but “we have to also think that AI can be a risk through state and non-state actors. So it is a public-private partnership, and we are pushing very hard across the agencies and at Treasury.”

Last July, Rounds introduced a bill that would direct the Securities and Exchange Commission, the Federal Reserve, the Consumer Financial Protection Bureau and other federal financial agencies to create in-house AI innovation labs. Those labs would essentially serve as sandboxes for agencies to test AI projects “without unnecessary…

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