Banking and Finance Law Daily Wrap Up, FINANCIAL TECHNOLOGY—Banking groups comment on AI regulatory reform, (Oct 28, 2025)

By Nora Macaluso

The ABA, ICBA, and CBA have suggestions for federal regulators as they look at ways to improve existing rules and guidance to promote AI innovation and adoption.

Banking groups weighed in on a Trump Administration request for information regarding regulatory reform on artificial intelligence.

The White House Office of Science and Technology Policy (OSTP) is seeking input on identifying existing Federal statutes, regulations, agency rules, guidance, forms, and administrative processes that unnecessarily hinder the development, deployment, and adoption of artificial intelligence (AI) technologies within the United States,” according to a Notice of Request for Information issued in September. The office said it is looking for comment on “priorities for such regulatory reform or other agency action necessary to promote AI innovation and adoption.”

The American Bankers Association said it and its members “enthusiastically support” the principles of the administration’s “action plan” for AI. “Banks are a unique sector already subject to an extensive compliance regime covering nearly all risks associated with AI, including fair lending and cybersecurity requirements,” the ABA said in a letter to the OSTP.

The ABA recommended updating supervisory guidance on model risk management “to account for current market practices and internal controls.”

Banking agencies, the group said, should continue to “revamp” examination procedures in line with “a regulatory environment that supports responsible innovation.”

The ABA suggested the development of voluntary standards and certification programs within the AI chain. “Developers and deployers should not have to choose among explainability, risk management, and commercial best practices,” the group said. “Over time, these voluntary programs will mature into federated AI Centers of Excellence providing value to banks of all sizes as well as the broader ecosystem.”

In addition, the group said, “Congress must assert its authority over AI policy in order to protect interstate commerce from a patchwork of state laws and ensure U.S. leadership in this vital sector of the global landscape.” However, the letter added, “these federal laws must not create duplicative or inconsistent requirements for the highly regulated banking industry.”

The Consumer Bankers Association said it is “imperative” that banks, bank examiners, and nonbank financial companies “have a clear and consistent understanding of regulators’ expectations for AI governance and oversight.”

The CBA said regulators should clarify guidance for model risk management and third-party risk management; educate banking agency staff “to alleviate ungrounded concerns about AI use and promote a tech-forward mindset in banking;” and allow banks to share necessary supervisory-related information with third-party service providers “to facilitate comprehensive responses to examination and other supervisory requests.”

The Independent Community Bankers of America, meanwhile, said it supports the administration’s effort to improve regulation surrounding AI. “However, the current policy environment does not yet give community bans a clear, harmonized view of what ‘good’ looks like for AI design, validation, monitoring, explainability, vendor oversight, and examiner expectations,” the group said in its comment letter.

ICBA recommended federal regulators “modernize” model risk management standards, coordinating with industry partners to devise practices that are “feasible for community banks to obtain from their vendors.”

The group said it could collaborate with the federal government on an “AI vendor transparency resource” covering “ feature-importance reporting, validation summaries, version histories, bias test methodologies and results, incident-reporting, and override and rollback controls.”

Agencies should also clarify data use and privacy practices, including technical safeguards such as ways to preserve privacy, that allow institutions “to strengthen models without compromising confidentiality,” ICBA said.

ICBA also recommended that the OSTP publish examiner training and evaluation guidance so community banks can align their practices to meet expectations.

A “regulatory sandbox” would allow Treasury and agencies to share testing and give banks a “safe and transparent path from pilot project to full deployment,” ICBA said.

“AI can be a competitive equalizer for community banks if the framework is designed with their realities in view,” ICBA said. “The Administration should focus on aligning existing AI oversight frameworks, modernizing mode risk management standards, and establishing clear third-party contract expectations to promote transparency without adding burden. Strengthening privacy and data-use safeguards, training examiners, and providing clear evaluation guidance will ensure consistent supervision across agencies.”

Companies: American Bankers Association; Consumer Bankers Association; Independent Community Bankers of America

RegulatoryActivity: AINews BankingOperations FinancialIntermediaries FinancialStability FinTech Privacy PrudentialRegulation