Amid growing warnings that artificial intelligence could pose existential risks to humanity, the Federal Reserve is sharpening its focus on how banks use the technology to defend against cyber threats.
The central bank has been taking steps to ensure that US banks are positioned to protect themselves against threats, such as hackers using AI to automate sophisticated cyberattacks, which could ultimately undermine the financial system.
Michelle Bowman, the Fed’s vice chair of supervision, said regulators want to help banks, especially smaller ones, protect themselves from vulnerabilities they might introduce by using products from other service providers and find ways to mitigate those risks.
“We regularly discuss AI with bankers at all levels of the Federal Reserve System,” Bowman said in a speech on May 1. “This includes direct conversations with individual banks, and broader conversations on principles for successful adoption.”
The Fed has been monitoring banks’ use of AI for nearly a decade and has seen a noticeable increase in AI adoption across banks of all sizes. Only the largest and most systemically important banks have the ability and the sophistication to use frontier AI models to help identify and mitigate risks. Smaller banks don’t have that capability.
To bridge this gap, Bowman is working to assist smaller banks through the Federal Financial Institutions Examination Council, a government interagency that sets uniform standards and reporting forms for examining financial institutions. Bowman, who chairs the council, is working with service providers for smaller banks to ensure that they maintain and provide safe, compliant products and services.
Federal Reserve Vice Chair for Supervision Michelle Bowman participates in a board meeting at the Federal Reserve on March 19, 2026, in Washington, D.C. (Kevin Dietsch/Getty Images) · Kevin Dietsch via Getty Images
Bowman and regulators have also had conversations with core service providers, including Mastercard (MA) and Visa (V), and are working on the next iteration of that with cloud service providers — the critical digital choke points where undetected vulnerabilities pose the greatest systemic threat — which smaller banks may not be able to identify.
The Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, recently proposed practices for the financial services industry to use as it integrates AI, which also helps regulators supervise how financial institutions use AI and better focus their supervision.
While Elon Musk and the chief executives of Anthropic (ANTH.PVT) and OpenAI (OPAI.PVT) have warned that development of the technology should be slowed, it was Anthropic’s Mythos — an AI model that identifies cyber vulnerabilities — that initially caught regulators’ attention in April.
Treasury Secretary Scott Bessent and then-Fed Chair Jerome Powell convened an unannounced emergency meeting at Treasury headquarters in Washington with the CEOs of the country’s most “systemically important” financial institutions to discuss Mythos and its potential to fundamentally transform and destabilize cybersecurity across the global financial system.
Bessent said Tuesday that the Trump administration has been working on artificial intelligence safeguards “nonstop” since the release of Mythos in April.
Bessent’s comments come after President Trump on Monday rejected calls for guardrails on AI models, writing in a post on Truth Social that the government already has “tremendous criminal and regulatory power over these companies!”
“The only control or ‘guardrails’ that AI needs is a STRONG AND SMART (High IQ!) PRESIDENT, and the U.S.A. has that, in spades!” Trump wrote. “The Trump administration has stopped AI ‘people’ from doing bad, or potentially bad, ‘things,’ like Dario (Anthropic!), who is now pretending to be a ‘perfect little angel’ — and we will continue to do so!”
JPMorgan (JPM) chief executive Jamie Dimon, in an interview with Yahoo Finance last week, voiced support for a “light touch” form of federal oversight for the AI industry, arguing that differing state laws complicate AI commerce.
Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance, she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram.
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