Abstract

Retail banking has been at the forefront of AI adoption for the past three years or so. The industry is now well-established and is using artificial intelligence (AI) to carry out financial transactions under predetermined guidelines, known as "Agentic Banking."

To accomplish this at scale, banks have now created three essential capabilities for the Agentic Banking model: Rule-Based Cash Sweep Mechanisms, API-Enabled Financial Transparency, and Autonomous Portfolio Rebalancing. Nevertheless, these capabilities raise a significant structural governance concern: What happens if AI is not designed to protect but is given the ability to optimize?

The paper presents the idea of the Fiduciary Gap, which is defined as "the mismatch between what the AI system is optimized to do, and the broader responsibilities of the institution towards customers and balance sheet."

The structured case analysis of the AI-driven deposit optimization agent ("Opti") demonstrates how banks lose their economic partnerships through rule-based execution, which makes them more dependent on deposits and creates financial risks because they lack qualitative stewardship in their execution process.

To address this risk, the paper proposes:

·       A Delegation Contract, which sets operational limits and conditions for escalating situations

·       A Fiduciary Hurdle Rate, which operates as an absolute execution stop

·       A pre-deployment simulation environment known as the Agentic Sandbox

·       Decision-level tracking, which operates through the Decision Integrity Chain™

·       The system establishes a conceptual framework that connects agentic penetration (ω) to deposit migration velocity

The paper presents Decision Engineering™ as a governance discipline that establishes execution frameworks that implement fiduciary restrictions through automated systems.

The paper states that fiduciary duty in programmable institutions must extend beyond mere policy to become an essential component of operational execution.

Further work on Decision Engineering™, the Decision Integrity Chain™ and the Fiduciary Gap™ is available at lumathink.com.

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 License.

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