Fed could require senior management to explain AI models

A new era of accountability might see the Federal Reserve demand model explainability to keep financial system safe.

machine learning

The Federal Reserve has signaled that the banking industry will soon see agencies intervening in the use of artificial intelligence in finance. Such regulatory interventions will likely focus on explainability, the extent to which the internal workings of AI models can be explained and understood in human terms, says Mark Chorazak, a partner in the financial institutions advisory and financial regulatory practice at Shearman and Sterling in New York.

“I think the greater concern in the

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