# FSOC 2024 Annual Report: Financial Stability Oversight Council 2024 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-2024
Last updated: Aug 26, 2026

FSOC's 2024 annual report, approved December 6, 2024, sharpened its AI analysis, warning that lack of explainability and high complexity could heighten instability beyond individual firms and that concentration in a few models or providers could create interconnection, herding, and contagion. It listed five persistent risk factors — explainability, data quality, performance assessment, third-party risk, and model bias — and recommended that member agencies keep monitoring AI, build interagency expertise on systemic AI risk, and continue Treasury-FBIIC-FSSCC cooperation. The report also references a staff-level FSOC Artificial Intelligence Working Group.

## At a glance

| Field | Value |
| --- | --- |
| Authority | [U.S. Treasury](https://www.bankingnewsai.com/ai-regulation/treasury) |
| Type | Report |
| Status | Superseded |
| Published | Dec 6, 2024 |
| 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-2024-annual-report |

## Key points

- Warns that concentration in AI models or providers may lead to interconnections, herding behavior, and contagion
- Five risk factors: explainability, data (higher volume and less structured), assessing performance and robustness, third-party AI vendors, and model bias/fair lending
- Notes generative AI 'hallucinations' and degraded analysis from low-quality or fake training data
- Recommends member agencies monitor AI so oversight structures address emerging risks while facilitating efficiency
- Supports interagency development of expertise to analyze and monitor systemic risks from AI
- Supports continued Treasury, FBIIC, and FSSCC public-private cooperation on AI
- References a staff-level FSOC Artificial Intelligence Working Group and Treasury's 2024 RFI

## What changed for banks

The 2024 report moved FSOC from noting AI risks to naming concrete systemic channels — model and vendor concentration, herding, contagion — and gave supervisors a shared five-factor risk vocabulary that appears in subsequent agency guidance on third-party AI and model risk.

## 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)
- [Third-party & vendor AI](https://www.bankingnewsai.com/ai-regulation/by-use-case#third-party-vendors)
- [Fair lending & discrimination](https://www.bankingnewsai.com/ai-regulation/by-use-case#fair-lending)
- [Generative & agentic AI](https://www.bankingnewsai.com/ai-regulation/by-use-case#generative-agentic-ai)

> Superseded by [FSOC 2025 Annual Report](https://www.bankingnewsai.com/ai-regulation/documents/fsoc-annual-report-2025).

Supersedes: [FSOC 2023 Annual Report](https://www.bankingnewsai.com/ai-regulation/documents/fsoc-annual-report-2023).

## FAQ

### What AI concentration risk did FSOC identify in 2024?

That many financial entities relying on a small number of base models or data providers could create interconnections, herding behavior, and contagion, amplifying instability beyond any single firm.

### Which AI risk factors does the FSOC 2024 report list?

Explainability challenges, data governance and quality, assessing performance and robustness, third-party vendor risk, and model bias including fair-lending compliance.

## Related documents

- [FSOC 2023 Annual Report](https://www.bankingnewsai.com/ai-regulation/documents/fsoc-annual-report-2023) — Financial Stability Oversight Council 2023 Annual Report — Section 3.3.3, The Use of Artificial Intelligence in Financial Services (Dec 14, 2023)
- [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)
- [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)
- [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-2024-annual-report) for the rule and this page for the summary and dates.

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