Fed Governor Michelle Schmid says AI ecosystem may need too-big-to-fail assessment

Federal Reserve Governor Michelle Schmid said regulators need to assess whether the artificial intelligence ecosystem has grown large enough to be considered "too big to fail." Her remarks focused on the expanding use of AI across the financial system and the need for supervisors to understand the risks that could come with that shift. Schmid said that as AI becomes more deeply integrated into financial activities, regulators must examine its potential systemic risk rather than treat it as a narrow technology issue. She also stressed that understanding the size of the AI ecosystem and the degree of interconnection within it is critical for safeguarding financial stability. The comments point to a regulatory concern that AI may become important not just as a tool used by financial firms, but as a connected ecosystem whose scale could matter for the broader system.