A recent report by the U.S. Department of the Treasury, Artificial Intelligence in Financial Services, examines the ways artificial intelligence is transforming the banking industry. The report covers the opportunities AI creates for innovation and efficiency, as well as the many risks it presents, including risks related to data security, bias, consumer protections and reliance on third parties. It makes a number of recommendations for enhancing current regulatory frameworks and encouraging collaboration among governments, regulators and the industry to mitigate these risks.
The report also highlights the need for banks that rely on AI models and systems developed by others to conduct robust due diligence on their AI providers. You can find the report at https://home.treasury.gov/system/files/136/Artificial-Intelligence-in-Financial-Services.pdf.
Watch out for “triggering terms” in marketing materials
When developing marketing materials — including website content and ads — banks need to watch out for “triggering terms” that require additional disclosures under the Truth in Lending Act and Regulation Z. For example, triggering terms for closed-end credit offerings, such as mortgages and auto loans, include the amount or percentage of any down payment (for example, “only 5% down”), the number of payments or the repayment period (for example, “60-month payment terms”), payment amounts (such as “$200,000 loan for only $700 per month”) or finance charges (such as “$750 total cost of credit”). Ads that include any of these terms must also “clearly and conspicuously” disclose the down payment amount (though the term “down payment” need not be used), the repayment terms and the annual percentage rate.
Banks should establish policies, procedures and tools (checklists, for example) to ensure that their ads and other marketing materials comply with Regulation Z.
Survey says …
The Conference of State Bank Supervisors (CSBS) recently published the results of its 2025 Annual Survey of Community Banks, which provides valuable insights into the challenges, risks and opportunities banks face. Here are some highlights:
- Community banks cited net interest margins as the most important external risk they face, followed by core deposit growth, economic conditions, cost of technology and cost of funds.
- Regulation, named the top external risk in 2024, fell to sixth, “as community bankers expressed less concern over regulatory burden amid a changing political landscape.”
- The top internal risk reported by community banks was cybersecurity, followed by technology implementation and related costs, and credit. Liquidity dropped from third to fourth.
- Community banks’ biggest competitors in most areas, respondents said, are other community banks, while local regional banks are their primary competitor for payment services. In addition, in-market nonbanks are their top competitor for wealth management and retirement services.
To view the survey, visit https://www.csbs.org and type “annual survey of community banks” in the search box.