State financial regulators are beginning to define what artificial intelligence oversight looks like inside banks and FinTech companies, even without a comprehensive federal rule governing the technology’s use across financial services.

The Conference of State Bank Supervisors (CSBS) released an AI supervisory framework for examiners reviewing state-chartered banks and state-licensed nonbank financial institutions, according to a Sept. 16 press release. It gives examiners questions to ask, documents to request and ways to decide when an AI system warrants closer scrutiny. Each state agency will decide whether and how to use it, but the framework offers firms a view of what an examination may cover.

“The use of AI provides a powerful new tool for financial institutions to improve services, protect consumers and increase operating efficiency,” CSBS President and CEO Brandon Milhorn said in the release, adding the framework “provides a principles-based approach to governance.”

The examiner guide directs examiners to look for where AI is being used by institutions, including in products, operations, compliance and internal support functions, as well as AI built into third-party software. An institution uncertain whether it uses AI may face follow-up questions about its vendor and software inventories before an examiner closes the inquiry.

From there, examiners may request AI policies, use-case inventories, risk assessments, management reports, vendor contracts and testing records. For customer-facing systems, the list extends to samples of chatbot transcripts, notices and other AI-assisted communications. The framework also asks whether firms assign owners to AI uses, rank them by risk and revisit their controls as systems change.

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