Artificial intelligence could come with both advantages and risks in the financial system, cautions the Federal Reserve’s chief banking regulator.
Michael S. Barr, the Fed Vice Chair for Supervision, told the National Fair Housing Alliance 2023 National Conference on July 18 that underserved communities could have greater access to housing because AI technology, such as machine learning, might ensure affordable credit is given to “people who otherwise can’t access it.”
At the same time, Mr. Barr is concerned that it would pose challenges by “violating fair lending laws and perpetuating the very disparities that they have the potential to address.”
“Use of machine learning or other artificial intelligence may perpetuate or even amplify bias or inaccuracies inherent in the data used to train the system or make incorrect predictions if that data set is incomplete or nonrepresentative,” he said in prepared remarks. “There are also risks that the data points used could be correlated with a protected class and lack a sufficient nexus to creditworthiness.”…