US Regulators Step Up AI Scrutiny at Banks #

U.S. banking regulators are increasing scrutiny of how financial firms use artificial intelligence, focusing on areas such as lending, know-your-customer checks, sanctions screening, data access and third-party vendors. Reuters reported that the OCC and Federal Reserve have begun asking banks detailed questions during routine examinations about governance, safeguards and human oversight

The focus matters because banks are using AI in more complex and higher-risk functions, while regulators are still relying mainly on existing risk-management, third-party oversight and consumer protection frameworks rather than AI-specific rules. Supervisors are also looking at controls such as guardrails, vendor exit plans and “kill switches” in case systems fail or behave outside their intended limits

Reuters