ABA Statement for the Record on AI Innovation Explored

The American Bankers Association (ABA) appreciates the opportunity to provide a Statement for the Record for this hearing, AI Innovation Explored: Insights into AI Applications in Financial Services and Housing. The ABA is the voice of the nation's $24 trillion banking industry, which is composed of small, regional and large banks that together employ approximately 2.1 million people, safeguard $19 trillion in deposits and extend $12.4 trillion in loans.

Banks are a model for how other industries can explore AI-enabled use cases in a safe and sound manner. The compliance requirements, model risk management expectations, and supervision by specialized regulators has resulted in an environment of trust and responsible innovation. Accordingly, the financial services sector can be a leader alongside government to encourage the proliferation of these features. We urge Congress to apply those same standards to non-bank participants, and we look forward to working with this Committee, your colleagues in the House and Senate and other policy makers and stakeholders to ensure that outcome.

Introduction

Financial institutions have a long history of deploying and controlling risk related to novel technologies, and this includes both the traditional and generative iterations of the Artificial Intelligence (AI) spectrum. Moreover, just like other technologies banks' use of AI is subject to a strong foundation of compliance to manage risks, including: three lines of internal risk-management defenses; application of technology-neutral laws, regulations, and guidance; and validation of the effectiveness of the framework through regular examinations by the bank regulatory agencies.

The following comments are based on discussions with ABA's AI Working Group, which is an interdisciplinary body of data scientists, technologists, compliance, legal, risk, security, and human resources experts representing banks of all sizes. This group routinely comes together to formulate policy positions as well as to discuss operational best practices. Our comments are also informed by the work of the Financial Services Sector Coordinating Council's R&D Committee (FSSCC R&D), which the ABA Co-Chairs. Last year, the FSSCC R&D Committee convened a series of meetings with financial sector experts to explore the role of AI in cybersecurity and fraud which resulted in a six page report that the US Treasury included in its March 2024 report on AI and cybersecurity. The US Treasury report was one of the many taskings in the October 2023 Executive Order on AI.

As discussed in greater detail below, ABA's comments are organized into four sections: (1) Regulation of AI; (2) How Banks Use AI; (3) Risk Management of AI; and (4) Recommendations for Policymakers.

Download the statement for the record to read the full text.