Malaysian banks are adopting AI faster than they are building the controls to govern it, according to a new Asian Institute of Chartered Bankers (AICB) report.
The study found that 92% of Malaysian banks and development financial institutions have begun using AI, mainly for onboarding, fraud detection, anti-money laundering and employee productivity.
Higher-risk uses such as credit underwriting, pricing and regulatory reporting remain less common.
Only 25% of respondents trusted AI-generated outputs enough to use them in key business decisions.
The report was produced by the AICB, Ecosystm and the AICB Chief Risk Officers’ Forum.
It surveyed 87 senior leaders from commercial banks, digital banks, Islamic banks and development financial institutions.
Most Banks Still Building AI Capabilities
About 44% of institutions were classified at the Developing stage of AI readiness, while 15% were Established and 2% Advanced.
Only 26% had a defined AI strategy, despite 44% already developing custom AI solutions.
Skills remain another constraint, with 79% reporting AI talent gaps or underdeveloped internal capabilities.
Only 20% actively encouraged AI-driven decision-making across their workforce.
AICB Chief Executive Edward Ling said,
“Malaysia’s banks and DFIs [Development Financial Institutions] are no longer asking whether AI has a role in financial services.
The question now is whether institutions have the judgement, ethics, governance and professional capability to use AI responsibly in decisions that affect customers, risk and institutional performance.”
Governance Remains Fragmented
Around 53% of institutions relied on fragmented or ad hoc AI governance, while 33% had structured governance and model risk management frameworks.
Only 27% formally classified AI systems by risk level, while 30% continuously monitored them throughout their lifecycle.
The report called for clearer guidance on model risk, explainability, third-party AI and data governance as banks move from pilot projects to wider deployment.
Watch our How to Build an AI-First Bank roundtable to hear Malaysian banking leaders discuss how they are applying AI across operations and preparing for agentic AI.
Featured image: Edited by Fintech News Malaysia, based on image by smartmalik6384 via Magnific
