As banks start to deploy artificial intelligence (AI) and machine learning technologies, the American Banking Association (ABA) has urged regulators to focus on clarifying AI regulations and guidance.
In a letter responding to a recent request for information from the Securities and Exchange Commission, the ABA emphasized that “new banking regulations are not necessary or warranted to address AI”, given the strict supervision and regulation banks are already subject to.
“AI makes banking services better, cheaper, and more widely available, and will continue to do so,” the association said. “While these benefits do not come without risks, we believe that the robust bank regulatory structure already captures these risks today.
“Accordingly, the agencies should avoid additional regulation of AI use by banks and provide a flexible framework that can encourage innovation while mitigating risks.”
The trade association also called for additional guidance around fair lending risk in the use of AI and mentioned how banks should be managing disparate impact risks.
Coordination across regulatory agencies was also emphasized. The ABA also encouraged agencies to support voluntary pilot or innovation programs that banks may participate in.
Last month, Liberty Bank of Middletown announced a partnership with fintech firm Payrailz to digitize its payments function for customers using AI technology.
Artificial intelligence could be used to streamline and speed up operations in banks, according to a recent column for Banking Exchange from Virtusa director Praveen Sharma. Those embracing AI’s capabilities are also using the technology to adopt “pre-trained” data models and real-time data analytics, as well as natural language processing techniques.
Meanwhile, prioritising responsible AI is key, according to IBM Global Business Services’ Phaedra Boinodiris. She says that organizations need to build an awareness of what responsible AI is, why it is unique and what the specific challenges are. Financial institutions should aim to prioritise diversity, equity, and inclusivity goals, as well as serve on the organisations AI ethics board.