US bank regulators ramp up scrutiny of AI use at financial companies

NEW YORK, June 13 (Reuters): US banking regulators are stepping up scrutiny of how lenders deploy artificial intelligence as the developing technology sweeps through the industry, pressing firms on everything from data access and governance controls to risks posed by third-party vendors, according to people familiar with the situation.
Banks have rapidly adopted artificial intelligence in recent years, expanding its use from virtual assistants to more complex functions such as regulatory monitoring and credit underwriting, drawing closer attention from regulators.
Regulators are stepping up scrutiny as the use of AI accelerates across financial services, exposing the sector to cybersecurity and fraud risks. For now, their approach is to keep a close watch, with the aim of deepening their understanding of how banks are deploying the technology.
The Office of the Comptroller of the Currency and the Federal Reserve have in routine bank examinations begun asking banks to map out how they use AI technology in higher-risk areas such as lending, know-your-customer checks and sanctions screening, three sources familiar with the matter said.
Supervisors are asking detailed questions about how banks use vendors, safeguard client data and whether they have controls such as "kill switches," the sources said. They are also probing governance frameworks, including guardrails and human oversight, third-party risk and vendor oversight, subcontractor exposure, and contingency plans in case of failures, the sources said.
Conversation around the use of AI is part of every bank examination, one of the sources said.
The discussions are taking place through both written and verbal channels. Regulators are not yet being prescriptive but are seeking to better understand how banks are using the technology, the sources said.
The sources declined to be identified because the discussions are private. The OCC, which regulates US banks, did not respond to a request for comment, while the Fed declined to comment.
The US banking regulators have publicly signaled closer scrutiny of lenders' use of artificial intelligence. Last year, the Government Accountability Office said, opens
new tab that regulators had told it they are assessing AI risks for financial services.
In April, opens new tab, the OCC said that it, the Fed and the Federal Deposit Insurance Corporation planned a formal request for information on banks' use of AI, including generative and agentic systems. Such a request does not impose new rules but helps agencies gather input before deciding whether to act.