# FSOC 2023 Annual Report: Financial Stability Oversight Council 2023 Annual Report — Section 3.3.3, The Use of Artificial Intelligence in Financial Services Source: https://www.bankingnewsai.com/ai-regulation/documents/fsoc-annual-report-2023 Last updated: Aug 26, 2026 FSOC's 2023 annual report, approved December 14, 2023, was the first to identify the use of AI in financial services as an emerging vulnerability to U.S. financial stability. It noted that AI can introduce safety-and-soundness risks such as cyber and model risk and consumer-compliance risks worsened by 'black box' explainability problems, singled out generative AI, and recommended that member agencies monitor rapid AI developments so oversight structures keep pace with emerging risks while facilitating efficiency and innovation. ## At a glance | Field | Value | | --- | --- | | Authority | [U.S. Treasury](https://www.bankingnewsai.com/ai-regulation/treasury) | | Type | Report | | Status | Superseded | | Published | Dec 14, 2023 | | Applies to | FSOC member agencies (recommendations); informs supervisory priorities for all U.S. financial institutions | | Official text | https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/financial-stability-oversight-council/studies-and-reports/annual-reports/fsoc-2023-annual-report | ## Key points - First FSOC annual report to name AI use in financial services as a vulnerability - Catalogues current uses: fraud prevention and detection, customer service, document review, and retail credit underwriting - Identifies safety-and-soundness risks (cyber, model risk) and consumer-compliance risks tied to explainability - Stresses data controls and provenance, including legal permission to use training data and protections when sharing data with third parties - Describes generative AI as a 2023 focus and flags its capacity to produce human-like text, code, and media - Recommends member agencies monitor AI developments and update oversight structures while facilitating innovation ## What changed for banks Before 2023, AI appeared in FSOC reports only in passing. Elevating it to a named vulnerability signalled to banking supervisors that AI governance, explainability, and data provenance would be examination themes, and it set up Treasury's 2024 RFI and reports. ## Use cases it governs - [AI governance (general)](https://www.bankingnewsai.com/ai-regulation/by-use-case#governance-general) - [Model risk management](https://www.bankingnewsai.com/ai-regulation/by-use-case#model-risk) - [Cybersecurity](https://www.bankingnewsai.com/ai-regulation/by-use-case#cybersecurity) - [Generative & agentic AI](https://www.bankingnewsai.com/ai-regulation/by-use-case#generative-agentic-ai) > Superseded by [FSOC 2024 Annual Report](https://www.bankingnewsai.com/ai-regulation/documents/fsoc-annual-report-2024). ## FAQ ### When did FSOC first flag AI as a financial stability risk? In its 2023 annual report, approved on December 14, 2023, which called AI use in financial services an emerging vulnerability. ### What AI risks did FSOC highlight in 2023? Cyber and model risk, consumer-compliance risk from unexplainable 'black box' models, and data-provenance and third-party data-sharing risks, with specific attention to generative AI. ## Related documents - [FSOC 2024 Annual Report](https://www.bankingnewsai.com/ai-regulation/documents/fsoc-annual-report-2024) — Financial Stability Oversight Council 2024 Annual Report — Section 3.3.3, The Use of Artificial Intelligence in Financial Services (Dec 6, 2024) - [FSOC AI Innovation Series (Mar–May 2026)](https://www.bankingnewsai.com/ai-regulation/documents/treasury-fsoc-ai-innovation-series-2026) — Artificial Intelligence Innovation Series — FSOC and Treasury AI Transformation Office roundtables (Jun 24, 2026) - [Treasury FS AI RMF and AI Lexicon (Feb 2026)](https://www.bankingnewsai.com/ai-regulation/documents/treasury-fs-ai-rmf-and-ai-lexicon-2026) — Financial Services AI Risk Management Framework (FS AI RMF) and Artificial Intelligence Lexicon (Feb 19, 2026) - [FSOC 2025 Annual Report](https://www.bankingnewsai.com/ai-regulation/documents/fsoc-annual-report-2025) — Financial Stability Oversight Council 2025 Annual Report — Section 3.4, Harnessing Artificial Intelligence to Promote Financial Stability (Dec 11, 2025) - [Treasury AI in Financial Services report (Dec 2024)](https://www.bankingnewsai.com/ai-regulation/documents/treasury-ai-financial-services-report-2024) — Artificial Intelligence in Financial Services — Report on the Uses, Opportunities, and Risks of AI in the Financial Services Sector (Dec 19, 2024) - [Treasury $4B AI fraud-prevention announcement (Oct 2024)](https://www.bankingnewsai.com/ai-regulation/documents/treasury-ml-fraud-prevention-fy2024) — Treasury Announces Enhanced Fraud Detection Processes, Including Machine Learning AI, Prevented and Recovered Over $4 Billion in Fiscal Year 2024 (Oct 17, 2024) - [Treasury AI RFI (June 2024)](https://www.bankingnewsai.com/ai-regulation/documents/treasury-ai-financial-services-rfi-2024) — Request for Information on Uses, Opportunities, and Risks of Artificial Intelligence in the Financial Services Sector (Jun 12, 2024) - [Treasury AI cybersecurity risks report (Mar 2024)](https://www.bankingnewsai.com/ai-regulation/documents/treasury-ai-cybersecurity-risks-report-2024) — Managing Artificial Intelligence-Specific Cybersecurity Risks in the Financial Services Sector (Mar 27, 2024) Last reviewed Aug 26, 2026. Cite the official text (https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/financial-stability-oversight-council/studies-and-reports/annual-reports/fsoc-2023-annual-report) for the rule and this page for the summary and dates. --- Canonical page: https://www.bankingnewsai.com/ai-regulation/documents/fsoc-annual-report-2023 Part of [BankingNewsAI](https://www.bankingnewsai.com/) — a free daily brief on AI in banking, an AI regulation tracker (41 authorities, 237 documents) and AI-strategy profiles of the 120 largest US banks. Markdown versions of every reference page: append `.md` to the page URL; index at https://www.bankingnewsai.com/llms.txt.