Banks are competing intensely in AI development to combat cyber attacks, according to U.S. Attorney General William Barr.

In a live-streamed cyber risk conference held by the Federal Reserve Bank of Cleveland, the Federal Reserve's vice chair for supervision, Michael Barr, issued a warning about a potential cybersecurity risk for the banking sector due to the rapid growth of generative artificial intelligence (AI).

Barr highlighted the importance of resiliency in critical service providers, with banks having a central role in ensuring this. He stressed the need for banks to invest in generative AI to safeguard against cyberattacks, and the importance of internal and external testing to ensure resilience and the ability to recover from a cyberattack.

The use of generative AI is evolving and could be a significant concept for the economy, finance, and various aspects of economic life. However, as with any new technology, it poses risks, and it is crucial to keep up with the next threat.

Barr emphasized the importance of third-party relationships for banks, stating that they have a responsibility to ensure vendors manage cyber risk effectively. Banks of all sizes, including those relying on third-party service providers and those moving to cloud-based solutions, need to ensure their relationships with third parties help manage cyber risk.

Rohit Chopra, Director of the Consumer Financial Protection Bureau, has also warned of the risks of generative AI from a consumer perspective. Chopra is closely monitoring how generative AI, when used by banks, could undermine or create risks in customer care due to the introduction of biases or incorrect information.

In a related development, an interagency initiative launched by the Justice Department, Federal Trade Commission, and Equal Employment Opportunity Commission aims to crack down on "unchecked AI" in lending, housing, and employment. The search results do not contain the name of the person who initiated the effort to combat uncontrolled AI in these areas in April 2023.

Barr also stated that an arms race between those using generative AI for attacks and those using it to block attacks will occur in the financial sector. If a bank has to cut itself off to protect the system from a cyberattack, it can cause bank failures due to ripple effects across the financial services sector.

In conclusion, the rapid growth of generative AI could lead to a constant struggle between defenders and attackers in a cyber arms race. It is essential for banks and financial institutions to be vigilant and proactive in managing their cyber risk to protect themselves and the wider financial system from potential devastating ripple effects.

Banks are competing intensely in AI development to combat cyber attacks, according to U.S. Attorney General William Barr.