Fed Official to tell Congress AI offers banks better risk detection, cheaper services

A top Federal Reserve official will tell Congress on Thursday that artificial intelligence promises to transform the banking sector — improving fraud detection, cutting costs and helping banks better serve customers — while cautioning that regulators must stay vigilant about the technology’s risks. Randall D. Guynn , director of the Fed’s Division of Supervision and Regulation, is scheduled to testify before the House Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence, according to written remarks released Wednesday. [caption id="attachment_220942" align="alignright" width="300"] (Courtesy/Bloomberg)[/caption] Guynn will give the testimony to Jay Gallagher , senior deputy comptroller and chief of national bank examiner at Office of the Comptroller of the Currency, Ryan Billingsley, director of division of risk management supervision, Federal Deposit Insurance Corporation, Amanda Parkhill, acting director of Office of Examinations and Insurance, National Credit Union Administration, on Thursday at 10 am EST. “The transformative power of newer AI technologies such as generative AI and agentic AI has driven exploration across the industry,” Guynn’s prepared testimony states. Guynn said many financial institutions have begun testing generative AI for document summarization and coding assistance, though he noted that adoption remains largely limited to lower-risk applications for now, according to the prepared remarks made public today. The Fed official acknowledged that AI carries real risks alongside its promise. He flagged concerns about explainability — the ability to understand how AI systems reach their conclusions — as well as potential bias, privacy issues and model failures. Banks typically have human oversight systems in place to manage those risks, he said, but urged firms to strengthen governance frameworks as adoption accelerates. The Fed itself is also exploring AI to sharpen its own supervisory work, Guynn said, including using the technology to process data from earnings calls, media reports and public filings to monitor the health of financial institutions. Human experts, he stressed, will retain final judgment. Guynn’s testimony also touched on digital assets and bank-fintech partnerships, but AI emerged as the most forward-looking theme — a signal of where federal regulators see the biggest changes coming for the banking industry.

Fed Official to tell Congress AI offers banks better risk detection, cheaper services

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