Australia’s financial regulator is urging banks, insurers, and superannuation funds to urgently improve how they manage risks associated with artificial intelligence, warning that current safeguards are not keeping pace with rapid technological change. The Australian Prudential Regulation Authority said in a recent supervisory review that AI is being widely adopted across regulated industries, but governance, oversight, and operational resilience frameworks remain underdeveloped. Regulators highlighted growing concerns about cybersecurity threats, including the use of advanced AI models that could accelerate the discovery of system vulnerabilities and increase the scale and speed of cyberattacks. The review also identified issues such as overreliance on single technology providers, limited transparency in embedded AI systems, and fragmented risk management across organisations. APRA officials stressed that many boards still lack sufficient technical understanding to properly oversee AI-related risks. While acknowledging AI’s benefits in improving efficiency and customer service, the regulator emphasised the need for stronger monitoring, faster response to vulnerabilities, and more consistent governance practices to ensure financial system stability in an increasingly AI-driven environment.
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