Washington, Feb 6 (IANS) Artificial intelligence has emerged as a priority risk for the US financial system, with Treasury Secretary Scott Bessent telling Congress that regulators are stepping up oversight of how AI is used across markets and institutions.
Testifying before the Senate Banking Committee, Bessent said AI is one of four focus areas in the Financial Stability Oversight Council’s 2025 annual report. “The council is prioritizing the responsible use of artificial intelligence to strengthen financial stability,” he said.
He said AI is increasingly used in compliance, fraud detection and risk management, but warned of new vulnerabilities. “AI can be a great tool, but AI can also be a risk through state and non-state actors,” Bessent said.
FSOC is working with both public and private partners, including international counterparts, to monitor emerging risks, he said. “We are working with public and private sector partners to enhance system resilience while closely monitoring emerging risk,” Bessent added.
Republican lawmakers welcomed the emphasis on innovation. Senator Mike Rounds asked whether regulatory barriers were slowing responsible AI adoption. Bessent said agencies are pursuing a “gradual” approach to implementation.
The report also highlights cybersecurity as a growing threat alongside AI. Bessent said nation-state actors and criminal groups continue to target financial institutions and critical infrastructure.
“To address this risk, the council is supporting expanded information-sharing, joint monitoring and scenario-based exercises,” he said.
Democrats expressed concern that regulators were underestimating risks. Ranking Member Elizabeth Warren warned that financial innovation without safeguards could amplify shocks across the system.
Bessent said the council’s goal is to identify vulnerabilities early rather than react after crises occur. “FSOC should aim to identify vulnerabilities that could lead to systemic crises and encourage the private sector to mitigate those risks before recommending additional regulation,” he said.
He also said FSOC is reassessing supervisory frameworks to ensure they address “material risk” while reducing unnecessary burdens.
AI’s growing role in finance has drawn global attention, particularly in countries like India, where banks and fintech firms are rapidly deploying AI-driven tools for lending, compliance and customer service.
US regulatory signals are closely tracked by Indian technology companies and financial institutions with cross-border operations.
The Senate hearing underscored how AI has moved from a niche issue to a core concern for financial regulators. Lawmakers said they expect further updates as FSOC’s AI work evolves.
FSOC was established after the 2008 financial crisis to monitor systemic risks across the financial system. Its annual report is used by regulators and lawmakers as a roadmap for emerging threats.
–IANS
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