Federal Reserve Vice Chair for Supervision Michelle Bowman urged a tailored regulatory approach to artificial intelligence in the financial system, advocating for a lighter touch on lower-risk AI uses. Speaking on Tuesday about a new report from the Financial Stability Board (FSB) on best practices for AI adoption, Bowman, who chairs the FSB's Standing Committee on Supervisory and Regulatory Cooperation, highlighted that regulatory policies should be proportioned based on the size of the bank and the risk profile of the AI activity. She noted that what is appropriate for larger financial institutions with complex AI applications may not be suitable for smaller ones with simpler AI uses.
Bowman emphasized the importance of fostering innovation while maintaining safeguards, particularly for higher-risk applications. She acknowledged that the Fed has been monitoring AI use by U.S. banks for nearly a decade and that U.S. work has informed the FSB's report. The report, which the Treasury Department and the Securities and Exchange Commission also contributed to, serves as an initial step in establishing global guidelines for AI.
She invited feedback from banks and stakeholders on the report's findings, specifically asking for identification of overly prescriptive safety and soundness practices or areas where the report fails to account for institutional differences. Additionally, she sought input on any material risks the document might not adequately address or areas needing more clarity. The FSB is accepting feedback until July 22, 2026, and the final report will be delivered as a U.S. G-20 deliverable later this year. The document is not limited to banks but applies across all types of financial institutions, including asset managers, broker-dealers, and wealth platforms.
