WASHINGTON – Rapid adoption of artificial intelligence (AI) could create new risks for the US financial system if the technology is not properly supervised, a panel of regulators warned on Thursday.

The Financial Stability Oversight Council, which comprises top financial regulators and is chaired by Treasury Secretary Janet Yellen, flagged the risks posed by AI for the first time in its annual financial stability report.

While the group said AI could spur innovation or efficiencies at financial firms like banks, the rapidly advancing technology requires vigilance from both the companies and their watchdogs.

“AI can introduce certain risks, including safety and soundness risks like cyber and model risks,” the group said in its annual report published Thursday, adding it recommended firms and their regulators “deepen expertise and capacity to monitor AI innovation and usage and identify emerging risks.”

The panel also flagged the growing role of nonbanks and private credit as meriting close attention, and said financial institutions and regulators should continue to try to better gauge risks stemming from climate change.

Some AI tools can be hugely technical and opaque, making it hard for institutions to explain or properly monitor them for shortcomings. If companies and regulators do not fully understand AI tools, then it is possible they could miss biased or inaccurate results, the report said.

It also noted that AI tools increasingly rely on large external datasets and third-party vendors, which pose their own privacy and cybersecurity risks.

Some regulators including the Securities and Exchange Commission, which sits on the panel, are scrutinizing how firms use AI, while the White House recently issued an executive order aimed at mitigating AI risk.

Elsewhere in the report, the FSOC noted that the US banking system remains resilient, despite large bank failures this year. But it urged regulators to keep a close eye on uninsured bank deposits, the rapid flight of which triggered the failures.—Reuters

Canada is planning a “broad and comprehensive program” that would allow many undocumented people to apply for permanent residency, the country’s Immigration Minister Marc Miller told The Global and Mail.

The announcement complements Canada’s ambitious immigration targets, which had already aimed to bring in 500,000 immigrants a year by 2025. The country’s population has grown mainly through immigration, and this has helped fuel economic growth in recent years.

An estimated 300,000 to 600,000 people are living in the country without valid documents, many of whom risk deportation because they lack formal status, The Global and Mail quoted Miller as saying.

The new program would also include people who entered the country legally, as temporary workers or international students, and then remained here after their visas expired, the report said.

Miller added that not all those without valid documents will be allowed to apply for permanent residency, including those who have arrived recently in the country.

He plans to submit a proposal to cabinet in the spring on allowing undocumented immigrants to “regularize their status,” the report added.

Amid the housing crunch and high inflation, the government last month kept immigration targets unchanged for the next two years and said it would stop ramping up immigration from 2026 onwards.

Canada is targeting 465,000 new residents this year, 485,000 in 2024 before hitting 500,000 in 2025 – a level it aims to maintain in 2026.—Reuters

A US labor agency is seeking to force Starbucks Corp. to reopen 23 stores that were allegedly shuttered last year to discourage a nationwide union campaign, the latest case to accuse the coffee chain of illegal labor tactics.

A regional director with the National Labor Relations Board (NLRB) in a complaint issued on Wednesday said that eight of the US stores had already unionized when they closed.

Workers at more than 360 of Starbucks’ 9,300 US stores have voted to join unions since 2021, and the company is facing more than 100 complaints at the NLRB alleging a variety of unlawful union-busting activity.

Starbucks has denied wrongdoing and said it respects workers’ rights to choose whether to unionize.

Starbucks in a statement on Thursday said it conducts annual reviews of its stores and routinely makes changes for a variety of legitimate reasons.

“This includes opening new locations, identifying stores in need of investment or renovation, exploring locations where an alternative format is needed and, in some instances, re-evaluating our footprint,” the company said.

The complaint claims that Starbucks closed the 23 stores without prior notice to Workers United, the union behind the campaign, and without affording the union an opportunity to bargain about the decisions, according to NLRB spokesman Matthew Hayward.

The agency is seeking an order requiring Starbucks to immediately reopen the 23 stores and re-hire employees, bargain with unions at stores that have unionized, and provide compensation to employees who lost pay and benefits, Hayward said.

The case will be heard by an administrative judge, whose decision can be appealed to the five-member NLRB and then to a federal appeals court.

The complaint came on the same day that Starbucks released a report on its labor practices prepared by an independent consultant, which had been requested by shareholders.

The report found that while there was room for Starbucks to improve its messaging on the union campaign, the company had not adopted “an anti-union playbook” that involved violating US labor laws.

An NLRB judge in July found that Starbucks had illegally shuttered a store in Ithaca, New York, months after it unionized. Starbucks is appealing that decision.—Reuters

BERLIN – Germany’s finance ministry has lifted a freeze on new spending that was imposed more than three weeks ago, according to a letter seen by Reuters on Thursday.

The move comes a day after Germany’s government clinched a last-minute deal on its 2024 budget following weeks of tense talks.

The letter dated Dec. 14 was from State Secretary of Finance Steffen Saebisch to the other government ministries.

“The budget freeze … ordered on Nov. 21, 2023, is hereby lifted with immediate effect,” it read.

The finance ministry added that it nevertheless recommended the “economical use” of funds “in light of the overall budgetary situation.”—Reuters

General Motors (GM) said on Thursday it is laying off 1,300 workers at two Michigan auto factories in early January.

The largest US automaker said 945 workers will be laid off at its Orion Assembly plant, which is ending production of the Chevrolet Bolt EV and being converted for electric truck production that will start in late 2025. Final production of the Bolt at Orion is set for next week, GM said.

Another 350 out of 1,400 total workers at its Lansing Grand River plant will be laid off due to the end of Chevrolet Camaro production, but the factory will continue producing the Cadillac CT4 and Cadillac CT5. GM said affected hourly employees will be offered positions at other factories.

GM disclosed in October it was delaying production of electric pickup trucks at the Orion plant by a year, so the layoff affects all production workers at that plant. The Detroit automaker had been set to begin production of the electric Chevrolet Silverado and GMC Sierra in late 2024 at the suburban Detroit plant.

GM CEO Mary Barra said the delay would enable the automaker “to make engineering and other changes that will make the trucks more efficient and less expensive to produce, and therefore more profitable.”

GM, which has vowed to stop selling gas-powered vehicles by 2035, in October said it was abandoning a goal of building 400,000 EVs from 2022 through mid-2024.

GM’s rival Ford said in October it was temporarily cutting one shift at its plant that builds the F-150 Lightning EV.

Ford told suppliers this week it planned to produce about 1,600 electric F-150 Lightning EV trucks per week starting in January in 2024, roughly half of the 3,200 it previously had planned.—Reuters