Artificial intelligence (AI) is now a key concern for the US financial system, according to Treasury Secretary Scott Bessent. Speaking before the Senate Banking Committee, Bessent emphasized the need for increased monitoring of AI’s use in markets and institutions. The Financial Stability Oversight Council’s 2025 annual report has identified AI as one of its main areas of focus for ensuring financial stability.
Bessent noted the expanding role of AI in areas such as compliance, fraud detection, and risk management. However, he also cautioned about the potential risks associated with AI, including vulnerabilities from both state and non-state actors. To address these concerns, the FSOC is collaborating with public and private partners, including international entities, to monitor and mitigate emerging risks effectively.
Regulators are taking a cautious approach to AI adoption, aiming to balance innovation with risk management. Bessent highlighted the importance of early identification of vulnerabilities to prevent systemic crises. The report also underscores the increasing cybersecurity threats faced by financial institutions, with a focus on enhancing information-sharing and conducting scenario-based exercises to bolster resilience.
The Senate hearing highlighted the shift of AI from a peripheral issue to a critical focus for financial regulators. While Republican lawmakers welcomed the emphasis on innovation, Democrats expressed concerns about underestimating risks associated with AI and financial innovation. The FSOC’s goal is to proactively identify and address vulnerabilities to prevent crises, emphasizing the importance of private sector risk mitigation efforts.
