Yellen to warn of 'significant risks' of AI in finance while acknowledging 'tremendous opportunities'
How does Yellen describe the potential benefits of AI for the financial system in her prepared remarks?
In her prepared remarks, Treasury Secretary Janet Yellen describes the potential benefits of AI for the financial system as "tremendous opportunities." She highlights that AI has been used by investors for forecasting and portfolio management and by banks to combat fraud and support customer service. She also notes that AI's "rapid evolution" could pave the way to make financial services cheaper and easier to access, pointing specifically to advances in natural language processing, image recognition, and generative AI.
What concerns did Yellen express regarding the concentration among vendors who develop AI models, provide data, and offer cloud services?
Yellen expressed concerns that the concentration among vendors who develop AI models, provide data, and offer cloud services may introduce risks that could amplify existing third-party provider risks2. She explained that if too many market participants rely on the same AI models and data, as well as cloud service providers, it could reinforce existing biases or create new ones that impact decision-making in financial markets2. Additionally, insufficient or faulty data could perpetuate or introduce new biases in financial decision-making.
According to Yellen, how could the reliance on the same AI models and data by multiple market participants impact financial decision-making?
According to Yellen, if too many market participants rely on the same AI models and data, as well as cloud service providers, it could reinforce existing biases or create new ones that impact decision-making in financial markets3. This is because the complexity and opacity of AI models, inadequate risk management frameworks to account for AI risks, and interconnections that emerge as many market participants rely on the same data and models can introduce specific vulnerabilities3. Additionally, concentration among vendors developing models, providing data, and providing cloud services may also introduce risks that could amplify existing third-party provider risks3. Insufficient or faulty data could perpetuate or introduce new biases in financial decision-making.