GAO report finds NCUA lacks tools to aid AI oversight
NCUA lacks tools to aid its oversight of credit unions’ artificial intelligence (AI) use, according to a recent Government Accountability Office (GAO) report. America’s Credit Unions was one of several organizations interviewed for the report, which highlights the use and oversight of AI in financial services.
The report notes that NCUA’s model risk management guidance is “limited in scope and detail and does not provide its staff or credit unions with sufficient detail on how credit unions should manage model risks, including AI models.”
GAO recommends the NCUA update its model risk management guidance to better account for the credit unions’ use of AI. The agency does not currently have its own detailed model risk management guidance. It relies on a 2011 document from the Federal Reserve and Office of the Comptroller of the Currency. This guidance does not address AI specifically, but America’s Credit Unions believes it could plausibly cover most applications today.
NCUA Chairman Kyle Hauptman’s response to the report is included in the appendices, and he wrote the NCUA “will review contemporary sound practices on model risk management and provide information and clarity to examiners and credit unions,” and notes the process will include assessing the efficacy of existing information about model risk management from other regulators and “any possible benefit of providing similar information to credit unions.”
The report also recommends that the NCUA be granted supervisory authority over third-party vendors, which America’s Credit Unions opposes.
Hauptman acknowledged the recommendation in his response, stating there are “risks to increasing the NCUA’s power over vendors.”