A thoughtful speech by Governor Brainard of the US Federal Reserve is the counter-argument to the EU AI ethics chief’s position; that regulation could hold off for now. After reviewing the increasing uses of AI (particularly machine learning) in financial services, the Governor suggests that regulators are required to consider consequences of the new technology, its risks and take a balanced view of its use. Regulation and supervision should not hamper innovation but mitigate risks. As well, the speech makes the astute point that regulation of supervised institutions should not be so onerous as to drive the technology into less supervised spaces.
The current regulatory environment is reviewed in the speech, including its applicability to regulation of AI. Immediate areas for regulation, such as transparency and explainability are reviewed, as well as theories of regulation such as having the level of scrutiny commensurate to the risk.
The Governor concludes with the following statement:
“When considering financial innovation of any type, our task is to facilitate an environment in which socially beneficial, responsible innovation can progress with appropriate mitigation of risk and consistent with applicable statutes and regulations.”
I think I much prefer this approach to that of the EU AI ethics chief. There is too much possible risk to simply wait for problems to be rectified by the courts. It is also reasonable to suggest that an absence of regulation or uncertainty of regulation could drive the use of technology to unsupervised institutions. The considerations and examples given in this speech also make it evident that we can reasonably trust regulators to take approaches that are not going to stifle innovation or use of AI.
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