The correct answer is C.

Regulators struggle with the oversight of AI models due to their complexity and lack of transparency. Many advanced AI applications, such as deep learning neural networks, operate as "black boxes." Their internal decision-making processes are highly complex and opaque, which makes it incredibly difficult for regulatory bodies to audit them, understand how they arrive at specific conclusions, or ensure they comply with risk management and fairness standards. This lack of transparency is the primary regulatory hurdle when banks employ sophisticated AI.

A is incorrect. The primary concern is auditing and overseeing the banks' use of models, rather than physically integrating these complex models into the regulators' internal IT systems.

B is incorrect. While a lack of standardized industry frameworks poses a challenge, the fundamental and most direct issue impeding oversight is the inherent complexity and opacity of the models themselves.

D is incorrect. Although the environmental impact (e.g., carbon footprint) of training complex AI models is a growing global concern, it is not the primary issue concerning financial regulators focused on compliance, stability, and risk oversight.