The Hidden Hazards of Billion-Dollar Banking

Hey everyone, Sultan here. Today, we’re diving into something that's pretty electrifying: how we’re about to revolutionize bank supervision using AI. AI can revolutionize bank supervision by enhancing real-time monitoring of financial transactions, enabling regulators to detect fraud and risk anomalies more efficiently. Additionally, AI-driven predictive analytics can help supervisors anticipate systemic risks and ensure regulatory compliance with greater accuracy. For our purposes, we’re going to get a little more specific. First things first though, we’ll go through some details and context to set our stage. The Problem Nobody Talks About Let’s be honest: the current bank rating system is practically a relic. The CAMELS rating system—no, it’s not about desert animals or cigarettes—is riddled with inconsistencies. While a cornerstone of bank supervision, it’s showing its age in today's rapidly evolving financial landscape. Here’s a quick breakdown of CAMELS: • C = Capital Adequacy 💰 • A = Asset Quality 📊 • M = Management 👥 • E = Earnings 💸 • L = Liquidity 💧 • S = Sensitivity to Market Risk 🌊 The real wild card? The “M” for Management. It’s shockingly subjective. I’ve seen nearly identical banks receive vastly different ratings because examiners had different interpretations—or just woke up on opposite sides of the bed. This isn’t just inefficient; it’s dangerous. Share Enter: Frontier Foundry’s AI Solution What if we could fix this with AI that runs on a single laptop? No, this isn’t about replacing humans—it’s about enhancing them. Think superheros with x-ray vision, but for bank health. Here’s what our AI does: 1. Natural Language Processing (NLP): Analyzes board meeting minutes to uncover hidden risks and trends. 2. Machine Learning Models: Identifies institutional patterns that humans might miss. 3. Benchmarking: Scores management decisions against industry standards. In tests, our approach predicted 9 out of 10 bank failures before they happened. Let that sink in. Why This Matters Now This isn’t just about cool tech—it’s about safeguarding the financial system at a time when trust in regulators is shaky. The FDIC has been making headlines lately for its release of hundreds of documents related to its supervision of crypto-related activities, revealing a history of resistance to banks engaging in blockchain or digital asset services. Acting FDIC Chairman Travis Hill has promised a more transparent and balanced approach moving forward, but the revelations have reignited debates over regulatory overreach and innovation stifling. Subscribe now Meanwhile, the Senate Banking Committee just held a fiery hearing on “de-banking ,” where lawmakers grilled regulators and banks over practices that have left entire industries—like crypto and cannabis—cut off from financial services. The issue has become so contentious that both sides of the aisle are calling for clearer rules to prevent politically or reputationally motivated account closures. These developments underscore the urgent need for tools like ours to bring consistency and fairness to financial oversight. Spicy Take 🌶️ The system isn’t just broken—it’s designed to stay that way. Regulatory arbitrage is a multi-billion-dollar industry where inconsistency equals opportunity for exploitation. By disrupting this with AI-powered precision, we’re not just improving supervision; we’re leveling the playing field. The Implementation Roadmap We’re not going full SkyNet. Here’s how we’ll roll this out: 1. AI as a Supplementary Tool: Work alongside human examiners. 2. Side-by-Side Comparisons: Test AI ratings against human ones. 3. Gradual Integration: Build trust in the system over time. 4. Real-Time Monitoring: Shift from static evaluations to dynamic oversight. 5. AI-Augmented Supervision: Empower regulators with cutting-edge tools. Who Am I Again? We’ve had a dramatically large jump in our audience size (shoutout to our marketing analyst) so some introductions might be in order. I’m Sultan Meghji, former FDIC Chief Innovation Officer and now CEO of Frontier Foundry. Having seen firsthand how outdated systems hamper effective regulation, I’m on a mission to bring banking oversight into the 21st century. Want More? • Subscribe below 👇 • Share this post with your friends in banking • Let’s build a safer, smarter financial future together The stakes have never been higher. Are you ready? Leave a comment Connect with us: LinkedIn , Bluesky , X , Website To learn more about the services we offer, please visit our product page. This article was written by Sultan Meghji, CEO of Frontier Foundry. Visit his LinkedIn here . This post was edited by Thomas Morin, Marketing Analyst at Frontier Foundry. View his Substack here and his LinkedIn here .