On June 10, the Financial Stability Board (FSB) published a consultation report on “sound practices” for the responsible adoption of AI by financial institutions. The report identifies 12 sound practices covering: (i) organization-wide AI governance, including strategic direction and board oversight, governance and accountability frameworks, incorporation of AI risks into risk management, and organizational adaptability; (ii) AI lifecycle management, including materiality and risk assessment, model selection, data governance, explainability and transparency, performance management, and human oversight; and (iii) management of AI-related cyber and information and communication technology risks, and third-party AI risk management addressing performance, transparency, data quality, supply chain concentration, and business continuity.

The FSB noted the sound practices are not intended to establish an international standard or impose a prescriptive approach for AI adoption, nor are they developed to address risks related to frontier AI models, although some practices would help institutions respond to such risks. The sound practices build on existing and ongoing work by the FSB and other standard-setting bodies and seek to foster coordination, cooperation, and information-sharing among financial institutions and supervisors within and across jurisdictions. The FSB strongly encouraged boards and senior management of financial institutions to reference the practices as they consider business strategy, technology adoption, and risk management. The final report is expected to be published in October. Comments on the consultation report are due by July 22.