Supervisors Symposium

How will Fintech and AI perform during a financial crisis and related significant recession or worse economic downturn? • A decline in cost savings can be anticipated for AI/fintech during a recession but the technology investment is likely still seen as a “positive payoff” because there likely will still be significant cost savings. • In short, the optimal use case for compliance purposes for AI/fintech may also be during a time of robust economic activity but the use of AI/fintech still will be valuable during economic stress times for compliance uses.

ARTIFICIAL INTELLIGENCE AND REGULATION

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MODEL BIAS

Model Validation: Bias Concerns There is a premise that the AI process is pure and lacks bias. • Is that a reasonable premise? • Indeed, there are places where biases can creep into data sets and lead to conclusions that are based on bias rather than on judgment. Alison Jimenez in the American Banker on August 16, 2019, wrote an op ‐ ed entitled, “AI Use Carries Bias Risk for Financial Regulators.” • References a June 2019 hearing of the U.S. House Financial Services Artificial Intelligence Task Force, which looked at the benefits and potential drawbacks of using AI in the financial services sector. • Jimenez is the president of Dynamic Securities Analytics Inc. and she warned that the House’s AI task force should broaden its scope to evaluate the bias risk involved with AI and the use of algorithms.

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