The financial services industry may serve as a proving ground for the regulation of artificial intelligence (AI), House Financial Services Committee Chairman Patrick McHenry, R-N.C., said Tuesday (July 23).
McHenry said this in opening remarks delivered during the committee’s hearing on AI applications in financial services and housing.
“The financial services industry — one of the most highly regulated in America — is a clear entry point as policymakers attempt to tackle the thorny questions AI presents,” McHenry said.
McHenry said in his remarks that while AI is not new to the financial services industry, the new developments in generative AI have “excited the imaginations of many.”
He added that lawmakers should be careful not to rush legislation, because it’s better to get it right.
At the same time, regulators must be ready to meet the demands of this new technology, and lawmakers should examine whether current regulation should be clarified and if targeted legislation should be considered to close any regulatory gaps, McHenry said.
“Gen AI is here. We cannot put it back in the box,” McHenry said. “It will become more widely adopted to the point it is embedded in our everyday lives.
“We cannot allow the fear of the unknown to thwart the United States’ role as a hub for technological innovation,” McHenry added. “Far greater than the risks associated with AI itself, are the risks of allowing foreign competitors and adversaries to lead the development, adoption and terms of use.”
This committee hearing comes five days after the House Financial Services Committee’s AI Working Group — which was established in January by McHenry and ranking member Maxine Waters, D-Calif. — released a report that examined AI’s impact on finance through a series of roundtables with regulators, market participants and consumer advocates.
The report highlighted AI’s potential to expand access to credit, enhance fraud protection and improve customer service, while also warning of challenges presented by the technology around data privacy, potential bias in algorithmic decision-making and the need to ensure AI systems comply with existing laws.
Bank executives are grappling with these issues too. While GenAI is rapidly gaining traction in the financial services sector, executives worry about the risk of spreading financial misinformation and exposing sensitive data to security breaches, according to the PYMNTS Intelligence and AI-ID collaboration, “Banking on AI: Financial Services Sector Harnesses Generative AI for Security and Service.”
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