The Pulse
State Bank Regulators Release AI Supervisory Framework
The Conference of State Bank Supervisors has released an AI supervisory framework for state-chartered banks and state-licensed nonbank financial institutions. The resource gives examiners a common set of questions while leaving each state a
AI.info Team ·
The Conference of State Bank Supervisors released an artificial intelligence supervisory framework on September 16, giving state examiners a shared method for reviewing how banks and nonbank financial firms use AI while leaving adoption decisions to individual state agencies.
The framework is designed to clarify what examiners may ask about AI-based products, services, and tools, as well as what information institutions may need to provide during an examination. CSBS describes it as a discretionary supervisory resource rather than a uniform requirement imposed across all state regulators.
That combination creates the framework’s central tension: financial institutions get a clearer view of the questions they may face, but the practical effect will depend on how each state incorporates the material into its own supervisory program.
One framework, different state decisions
CSBS says the resource helps examiners identify and understand an institution’s use of AI, assess related risks, and decide when a deeper review is appropriate. The framework is meant to be applied according to an institution’s size, complexity, risk profile, and specific uses of AI.
Each state agency will determine the extent to which the framework enters its supervisory program. The announcement does not set out a single implementation timetable or require every state to apply the framework in the same way.
That approach reflects the structure of state banking supervision. CSBS supports financial regulators from all 50 states, as well as U.S. territories and the District of Columbia. The organization says state regulators supervise 79% of U.S. banks and a range of non-depository financial services firms.
What examiners and institutions can use
The framework is intended to give examiners a general approach for reviewing AI governance and risk management. CSBS says it can help identify when an institution’s use of AI warrants a more detailed examination using existing supervisory resources.
For banks and nonbank firms, the same document is meant to serve as a preparation tool. Institutions can use it to assess their own AI programs, establish governance and risk-management practices, and prepare for questions during examinations.
CSBS President and CEO Brandon Milhorn said the framework is meant to balance the potential benefits of AI with the risks associated with its use.
“The use of AI provides a powerful new tool for financial institutions to improve services, protect consumers, and increase operating efficiency. While any new technology can present risks, the CSBS AI Supervisory Framework provides a principles-based approach to governance intended to help financial institutions explore and implement AI with additional confidence,”
Brandon Milhorn, president and CEO, Conference of State Bank Supervisors
Built from existing risk guidance
CSBS says the framework draws on three established sources: the National Institute of Standards and Technology’s AI Risk Management Framework, the Cyber Risk Institute’s Financial Services AI Risk Management Framework, and the U.S. Department of the Treasury’s AI Lexicon.
The announcement presents those materials as the foundation for a principles-based approach. It does not identify a new technical standard or prescribe one model for every institution. Instead, the framework is structured around understanding how an institution uses AI and whether its controls match the risks created by that use.
That distinction matters for smaller banks and for nonbank firms whose AI applications may differ widely. A bank using automated tools for internal operations may face a different review from a firm using AI in customer-facing financial services, and CSBS says the framework is designed to account for those differences.
CSBS had been preparing for AI oversight
The new framework follows CSBS’s creation of an Artificial Intelligence Advisory Group in August 2024. The group brought together participants from academia, financial services, nonprofit organizations, and technology companies to advise CSBS and state supervisors on AI policy and oversight.
CSBS said at the time that the advisory group would help state regulators consider legal, policy, and supervisory questions connected to AI in financial services. The framework is the organization’s latest public step in turning that work into examination guidance.
The new resource also fits with CSBS’s broader effort to update supervisory tools. In May 2025, the organization announced its Catalyst Initiative, which focused on technology projects intended to improve financial supervision and reduce reporting burdens.
The next test is implementation
The framework gives state examiners and financial institutions a common reference point, but its immediate impact will be determined by state-level use. CSBS has not said that every state agency will adopt the material in full, and the announcement does not describe a centralized enforcement process.
For institutions, the practical message is to document where AI is used, how related risks are assessed, and who is responsible for governance before an examiner asks. For regulators, the framework offers a way to begin with the institution’s actual AI activity and determine whether existing supervisory resources are enough.
The Conference of State Bank Supervisors published the framework alongside its September 16 announcement, which remains the primary public record for the release.