The Australian Securities and Investments Commission (ASIC) plans to review how banks use artificial intelligence (AI).

The review will focus on new and proposed AI use cases and their impact on customers.

ASIC set out the plan in its banking sector priorities letter for 2026-27. The review is expected to begin in the second quarter of the financial year.

The regulator said it “recognises the opportunities presented by AI and automation”. At the same time, it wants key consumer protections to stay in place as banks adopt the technology.

This applies especially to customer-facing interactions, decision-making and lending.

ASIC will also coordinate with the Australian Prudential Regulation Authority (APRA) to avoid overlap with APRA’s own AI risk work.

The review builds on ASIC’s Report 798, published in October 2024. That report found AI adoption in financial services was growing.

However, governance and risk assessment were lagging behind, including when assessing consumer risks.

In addition, ASIC plans to review lender conduct from the third quarter. It will likely look at the impact of short-term variable pay changes that banks introduced for bank-employed lenders in 2024.

The review may also cover the use of referrers and how lenders oversee brokers.

For small businesses, ASIC will examine non-bank lending practices that can lead to poor outcomes. These include the use of unfair contract terms.

Meanwhile, ASIC will continue to monitor mortgage offset accounts. It will also publish findings from its review of debt collectors and lender oversight in the third quarter. Hardship support remains an important area of focus.

Finally, ASIC will work with Treasury and other regulators on the Scams Prevention Framework, due to start in March 2027.

Featured image: Edited by Fintech News Australia, based on image by Magnific.