FRB Governor Brainard Focuses On Risks And Supervisory Approaches Associated With AI

Federal Reserve Board ("FRB") Governor Lael Brainard urged firms to be mindful of risks associated with artificial intelligence ("AI") innovation and advised regulators to remain diligent in the quest to understand and regulate the use of AI by supervised firms.

In remarks at the FinTech and New Financial Landscape Conference, Ms. Brainard underscored the "pace" and "ubiquity" of AI innovation. She emphasized the benefits and potential risks to bank safety and consumer protection that new AI applications pose. Ms. Brainard said that regulation and supervision designed to focus on risks should not hinder innovation that may benefit consumers and small businesses. Ms. Brainard said that supervisory guidance to firms must be read in the context of the "relative risks," and that the "level of scrutiny" directed at each AI approach should be proportional to the potential risks posed by the approach, tool, model or process utilized.