President Biden today issued a sweeping executive order directing federal agencies to review and possibly draft new rules governing the use of artificial intelligence across multiple sectors of the economy, including financial services. Among other things, the order encourages agencies to use their authority to address financial stability risks posed by AI. It directs the Treasury Department to submit a report within 150 days on best practices for financial institutions to manage cybersecurity risks posed by AI. It also urges the CFPB and federal housing regulators to ensure AI isn’t used to discriminate in appraisals and lending.
The 100-plus page order will require the developers of many AI systems to share their safety test results and other critical information with the U.S. government, set standards and best practices for detecting AI-generated content as a tool for fighting consumer fraud, and establish an “advanced” cybersecurity program to develop AI tools to find and fix vulnerabilities in critical software, according to the White House. It also directs the Federal Communications Commission to review how AI may improve telecom network resiliency and spectrum efficiency, as well as aid the federal government’s fight against unwanted robocalls and robotexts.
The order calls on Congress to pass legislation to protect people’s privacy, including guidance for federal agencies to account for AI risks to privacy. In addition, it directs agencies to establish principles and best practices to mitigate the harms to workers displaced by AI.
As for AI in financial services, the order directs CFPB and the Federal Housing Finance Agency to “consider using their authorities” to ensure that AI systems comply with existing federal laws protecting against bias underwriting and appraisals. The order also urges the CFPB and Department of Housing and Urban Development to issue guidance within 180 days “to combat unlawful discrimination” resulting from AI used in decisions about housing access and other real estate transactions.
The American Bankers Association is collaborating with the Treasury Department on the proposed cybersecurity risk report by convening discussions with financial industry leaders on AI-related cyber risks and risk management practices. In a statement, the association said the order is an important step toward addressing the technology’s rapid development and increased use in the U.S. and globally. ABA added that it is particularly pleased the administration is looking at AI holistically across multiple industries and recommending sector-specific risk assessments.
“Banks are successfully and safely using AI today, and we believe new iterations of the technology can enhance innovation, compliance, risk management and a host of other important bank functions moving forward,” ABA said. “While we continue to review the executive order and expect to learn more about how it will be implemented, we look forward to our ongoing collaboration with Treasury, independent regulatory agencies and others in the administration on these critically important issues.”