Fed Tackles Conflicts of Interest at Reserve Banks Amid AI Risk Concerns
The Federal Reserve has announced plans to address conflicts of interest for reserve bank officials after an investigation by its inspector general identified several issues in the hiring process.
The report, released on Wednesday, examined practices between 2021 and 2024 and found that there was a lack of screening for prohibited investments, the role bankers sometimes play in recruiting members for regional Fed bank boards of directors, and conflicts of interest during presidential searches.
The inspector general's office recommended 10 policy changes to create more standardized hiring processes across the system. Credit unions have been warned about an AI risk gap, with only 18% of respondents saying AI model risk is a critical or high threat, compared to 62% at national banks and other financial institutions.