The Pulse
ASIC to Review Banks’ Customer-Facing AI in 2026–27
Australia’s corporate regulator will review banks’ new and proposed uses of AI and their impact on customers, starting in the second quarter of 2026–27, according to the supervisory priorities ASIC published for banks, super, insurance and
AI.info Team · Written with AI ·
A review of AI in banks’ customer-facing work
Australia’s corporate regulator will review how banks use artificial intelligence with customers, the Australian Securities and Investments Commission (ASIC) said on Wednesday as it published its supervisory priorities for 2026–27. The review is one of the new activities in a letter to bank boards and executives, one of five sector letters ASIC released alongside a media release.
According to the banking letter, the AI review will focus on new and proposed uses of AI by banks and their impact on customers, and is expected to begin in the second quarter of 2026–27. ASIC said it will work with the Australian Prudential Regulation Authority (APRA) to minimise duplication with any work APRA is doing on AI risks. The letter is signed by ASIC Commissioner Kate O’Rourke.
ASIC wrote that it recognises the opportunities presented by AI and automation and wants to ensure that key consumer protections are maintained throughout their deployment, particularly for customer-facing interactions, decision-making and lending processes.
Lending conduct and brokers are next
The banking letter lists two more new reviews. From the third quarter of 2026–27, ASIC will examine lender conduct, likely focusing on the effect of the short-term variable pay changes that banks introduced for proprietary lenders in 2024, lenders’ use of referrers and their oversight of mortgage brokers. That work follows ASIC’s work with APRA and AUSTRAC on reported mortgage loan fraud. From the second quarter, it will also look at non-bank lending to small businesses, including the use of unfair contract terms.
The letters are meant to show regulated firms a year ahead where supervisors will look. ASIC Chair Sarah Court, who succeeded Joseph Longo in June, said in the release:
“We encourage boards and executives to carefully consider the issues highlighted in the letters so they can plan, allocate resources and focus attention accordingly.”
Sarah Court, Chair, Australian Securities and Investments Commission
Court said the letters are part of a Council of Financial Regulators workstream, led jointly by ASIC and APRA, that responds to the Treasurer’s request for a Better Regulation Roadmap for the financial sector.
AI appears in the other sector letters too
The markets letter says ASIC will assess and address AI-driven manipulation and market-integrity risks, including deepfakes and misinformation, using generative AI, social-media monitoring and cross-market analysis. It also lists oversight of the ASX24 and TMX Australia Exchange moves to new trading platforms and of CHESS Release 2, and says ASIC expects market intermediaries to explore defensive AI for threat intelligence, vulnerability detection and incident response.
In superannuation, AI usage sits among ongoing areas of focus alongside misconduct targeting vulnerable members, scam prevention and cyber resilience. New super work covers trustee oversight of advice fee deductions and trustee performance under the retirement income covenant. In general insurance, ASIC has begun a review of for-profit claims management firms, including those commonly called “disaster chasers”; in life insurance it will review funeral insurance practices.
What ASIC found in 2024
The banking letter points back to ASIC’s Report 798, “Beware the gap,” published in October 2024. That review covered 624 AI use cases at 23 licensees in banking, credit, insurance and financial advice, in use or in development as at December 2023. It found that AI mostly augmented human decisions, that direct interaction between AI and consumers was limited, and that for two licensees AI governance arrangements lagged AI use.
The report listed potential harms including bias and discrimination, false information, exploitation of consumer vulnerabilities and erosion of trust. Longo, then ASIC’s chair, wrote in its foreword:
“There is a real risk that such gaps widen as AI use accelerates and this magnifies the potential for consumer harm.”
Joseph Longo, then Chair, ASIC, foreword to Report 798 (October 2024)
Since that report, ASIC said, it has continued to engage with banks on their AI use through supervision. The new review is set to begin in the October–December quarter, and ASIC has not said when it will publish findings.