FSOC Identifies AI as Potential Risk to Financial Stability

Concerns Raised Over Operational Risks, Financial Fragility, and Compliance Implications

Artificial Intelligence (AI) has been identified as a potential risk to financial stability in a new government report by the Financial Stability Oversight Council (FSOC).
AI's reliance on large datasets and third-party vendors introduces operational risks related to data controls, privacy, and cybersecurity.
AI's rapid adoption in the financial sector could heighten financial fragility and promote herding among individual actors making similar decisions.
AI's opaque nature and potential for biased or inaccurate results could have implications for fair lending and consumer protection compliance.
The FSOC report also highlighted other risks including vulnerabilities in commercial real estate sector, cybersecurity, climate, and cryptocurrencies.