WASHINGTON — The Financial Stability Oversight Council, the panel of top U.S. financial regulators created by the Dodd-Frank Act of 2010, is moving toward a formal review of artificial intelligence risks in the banking system, according to the record of its recent activities. Treasury Secretary Janet Yellen chairs the FSOC. The council includes Federal Reserve Chair Jerome Powell, Securities and Exchange Commission Chair Gary Gensler, and other financial regulators.
Its statutory mission is to identify and respond to systemic risks to the financial system. On the timeline, the SEC proposed rules in 2024 requiring AI-related disclosures from public companies.
That regulatory action preceded the Federal Reserve’s stress tests on banks’ AI loan portfolios. The Treasury’s Office of Financial Research has prepared a report that is expected to be discussed at the next FSOC meeting in March 2025. The FSOC’s focus on AI reflects a broader concern among regulators that the rapid adoption of machine-learning models in lending, trading, and risk management could introduce new vulnerabilities.
The council was established specifically to spot such cross-market threats before they crystallize. Critics argue that regulators lack the technical expertise to assess AI-specific risks.
Industry groups, meanwhile, warn against overregulation that could stifle innovation or push AI activities into less transparent parts of the financial system. The FSOC’s March meeting will be a key test of how the council balances those competing pressures. The OFR report is expected to provide a detailed assessment of where AI adoption poses the greatest potential for systemic disruption.
For now, the council appears to be moving deliberately. The record shows a pattern of information-gathering and interagency coordination rather than immediate rulemaking. That pace may reflect the complexity of the subject matter as much as any political calculation.
The council’s next steps will be closely watched by both Wall Street and Silicon Valley. The intersection of artificial intelligence and finance is growing faster than the regulatory framework designed to oversee it.
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