REGULATION
CFPB Outlines Strict AI Regulation on Wall Street

The CFPB is advocating for strict AI oversight in financial services, pushing back on regulatory sandboxes and emphasizing compliance with existing consumer protection laws, according to an August 12 comment letter to Treasury Secretary Janet Yellen.

Responding to the Treasury's request for information on AI in finance announced in June, the Consumer Financial Protection Bureau outlined its approach to regulating AI, stressing that innovation must not compromise consumer protection.

"If firms cannot manage using a new technology in a lawful way, then they should not use the technology," wrote CFPB General Counsel Seth Frotman and Chief Technologist Erie Meyer.

• The CFPB rejects the notion of regulatory sandboxes or special exemptions for AI, stating that such programs have failed to encourage pro-consumer innovation effectively.

• Areas of particular concern include AI use in automated customer service, fraud screening, and lending decisions, with an emphasis on preventing discrimination and ensuring compliance with laws like the Equal Credit Opportunity Act.

INVESTING
AllianceBernstein, PGIM on AI in Fixed Income

Unlike previous technological advancements, AI and machine learning are revolutionizing investment strategies by tackling complex analytical problems and processing vast amounts of unstructured data, per Pensions & Investments.

• AllianceBernstein, which manages $294 billion in fixed income, sees potential in using machine learning to determine fair spreads for bonds based on complex characteristics, and to create better factors for fixed-income investing.

• PGIM Quantitative Solutions leverages natural language processing to extract valuable information from company communications and filings, enhancing their quantitative equity models.

• Quantitative methods in fixed income is an ongoing process and machine learning and AI will play “ever-increasing” role, according to Bernd Wuebben, director for systematic investing and quantitative research at AllianceBernstein.

CREDIT
Acuity Aims to Use AI to Speed Up Bank Loans

Acuity Knowledge Partners, a financial services technology provider announced a new AI-powered software, CreditPulse, designed to accelerate bank loan decisions.

The AI software analyzes financial data, generates reports, and assesses risks, streamlining the loan approval process for banks, the London-based company said in an August 12 press release.

CreditPulse is designed to help analysts identify portfolio risks with Gen AI. Acuity claims the software could increase loan review efficiency by 25-30%. Its adoption rate may indicate how readily traditional banks are embracing AI technologies in their core operations.

AI ADOPTION
Goldman Sachs CIO on How the Bank Is Actually Using AI

Marco Argenti, Chief Information Officer at Goldman Sachs, discusses the bank's strategy for integrating AI technology on Bloomberg’s Odd Lots Podcast.

• Goldman built a proprietary AI platform to safely leverage existing models, rather than building their own models from scratch.

• The bank has seen 10-40% productivity increases among developers using AI tools, with plans to expand AI use beyond coding.

• Argenti believes AI will elevate work quality across roles, potentially leading to more jobs as efficiency increases allow for new initiatives.

• "Models are raw material of intelligence. You need to somehow direct them, you need to guide them, you need to instruct them, you need to put them in an environment that actually gets the most out of that. And that's what we've been focusing on."

  Listen to the podcast | Read the transcript 

JPMorgan Expects AI to be as ubiquitous as Zoom at the Bank

• I’ve written about JPMorgan’s push into Gen AI previously, but this CNBC story has some great details on what the bank expects:

  • The software is expected to be as ubiquitous within the bank as Zoom, people with knowledge of the plans told CNBC.

  • JPMorgan designed LLM Suite to be a portal that allows users to tap external large language models and launched it with ChatGPT maker OpenAI’s LLM, said the people.

  • The bank is using AI to determine where to place new branches and ATMs from satellite images.

13Fs
Peeking into Wall Street's Playbook

Money managers with at least $100 million assets, such as hedge funds, insurance companies and banks must submit 13F filings quarterly, disclosing their holdings in certain U.S. exchange-traded securities within 45 days after the end of each quarter.

For those interested in tracking these portfolio changes, FinChat offers a free tool, according to Braden Dennis, the company's cofounder. Its "Super Investors" page allows users to track the moves of well-known investors. FinChat is used by 150,000 investors and organizations, per the company.

HEDGE FUNDS
AI at Man Group, Atalaya Capital

• At Man Group, AI is being used for "extracting information from bond prospectuses," streamlining a traditionally time-consuming process, per Bloomberg.

• At Atalaya Capital Management, a roughly $10 billion private-credit firm, gen AI has greatly accelerated the process of searching for potential borrowers in its equipment-leasing business and drafting legal contracts.

  • “[AI is] still not at the level where you can just give them a super broad task, so you can’t say: ‘Hey, is this a good investment?’” says head of data science Andy Halleran.

QUICK LINKS
Smaller, Cheaper AI Models Are Getting Big Attention

OpenAI, Google and Meta are all investing in more affordable alternatives to large language models. (Bloomberg)

McKinsey Sees AI Surge Boosting Consulting

McKinsey says about 40% of its client work involves AI with banking, insurance among sectors adopting technology rapidly. (Bloomberg)

Bank Technology Execs on AI

Krish Swamy, chief data and analytics officer at Citizens Financial Group, expects the bank's investments in AI in 2025 and 2026 will be higher than in 2024. (Yahoo)

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