Janet Yellen: AI is a huge opportunity, but also a huge risk for US financial stability

Treasury Secretary Janet Yellen calls on the American public to consider the opportunities and risks of artificial intelligence (AI) in the financial sector.

At a key conference, she emphasized the need for broader input to determine the way forward in this rapidly evolving technology. According to Yellen, AI potentially poses a huge threat to the country’s financial stability.

Yellen calls for public input

The U.S. Treasury Department is preparing for a range of opportunities and risks that the artificial intelligence (AI) sector will bring in the coming years.

This was the theme during Treasury Secretary Janet Yellen’s keynote address at the Conference on Artificial Intelligence and Financial Stability. The event was organized by the US Financial Stability Oversight Council (FSOC) in partnership with the Brookings Institution on June 6 and 7.

According to the FSOC, this is the first time in ten years that the council has organized an event of this nature.

During her keynote address, Secretary Yellen issued a formal call to action in the form of a request for public comment on the risks and opportunities AI poses for financial institutions, consumers, and other stakeholders with a direct interest in financial stability of the US.

Opportunities and risks of AI in the financial sector

Yellen mentioned several key opportunities for financial institutions using AI, including cybersecurity benefits, more accurate forecasts and predictions, as well as customer service and account management.

But, as the minister put it, “there are also new issues to address, and this is a rapidly evolving area.” Referring to the “tremendous opportunities” and “significant risks” of AI technologies, Yellen added.

Among the potential risks, Yellen included concerns about the centralization of AI models and data – something that could theoretically expose the US economy to a single point of failure. She also mentioned AI’s tendency to create or reinforce biases due to the “black box” nature of many models.

The black box nature of AI means it is difficult to understand how the technology reaches its conclusions or recommendations. According to Yellen, there is a great danger in this.

Focus on monopolies in the sector

In related news, US Competition Authority Jonathan Kanter announced that his office is investigating the AI ​​sector over concerns about monopolies. Kanter fears that a few companies will gain complete control, due to their extremely strong position in the field of AI.

This includes companies such as NVIDIA and Microsoft. NVIDIA is of course the big leader in AI computer chips, while Microsoft owns a large share of OpenAI. OpenAI is the company behind the famous ChatGPT.

Can or should the American government do something about these positions of power?