* APRA warns banks lag in AI security, urges stronger

cyber practices

* Frontier AI like Anthropic's Mythos could enhance cyber

attack risks, experts caution

* S&P Global says AI may affect Asia Pacific banks'

credit standing

By Scott Murdoch

SYDNEY, April 30 (Reuters) - Australia's financial

system regulator said on Thursday the country's banks were not

keeping pace with AI industry developments, warning frontier AI

systems such as Anthropic's Mythos had the potential to lead to

larger and faster cyber attacks.

In a letter to banks, the Australian Prudential Regulation

Authority (APRA) said most of the industry's information

security practices were struggling to match the rate of change

in AI.

The regulator said the speed of AI development could pose a

growing threat to Australia's financial services.

"It also warns frontier AI models such as Anthropic's

Claude Mythos, which could enhance the discovery of

vulnerabilities by bad actors, are expected to further increase

the probability, speed and scale of cyber attacks," APRA said in

a statement referencing a review that it had conducted.

Anthropic did not immediately respond to a Reuters request

for comment.

Potential risks posed by Mythos, which has high-level coding

capabilities, have given it a potentially unprecedented ability

to identify cybersecurity vulnerabilities, experts have warned.

Anthropic has launched ​Claude Mythos Preview under Project

Glasswing, a tightly restricted access programme that includes

major ‌technology ⁠firms such as Amazon ( AMZN ), Microsoft ( MSFT )

, Nvidia ( NVDA ) and Apple ( AAPL ).

"APRA has heard clear recognition from regulated entities

of the need for a step change in cyber practices and a

continuing uplift in capabilities to protect IT assets in an

evolving threat environment," it said.

Australia is working with software providers including

Anthropic over potential cybersecurity vulnerabilities, ​a

spokesperson for Home Affairs minister Tony Burke said last

week.

APRA said its industry consultation had found banks were

relying too heavily on AI model presentations and summaries from

vendors without considering the risks that could emerge.

"APRA observed many boards are still developing the

technical literacy required to provide effective challenge on

AI-related risks and oversight," the letter said.

The regulator said while banks already had strict security

procedures in place, some were not engineered to keep pace with

the development of AI.

The Australian Banking Association did not immediately

respond to a Reuters request for comment.

Separately, ratings agency S&P Global said on Thursday AI

would affect the credit standing of Asia Pacific financial

institutions over the next one to five years.

It said most banks in the region had large technology

budgets that would help mitigate any negative impacts and AI

could help reduce costs.

But the impact across the region's broader financial

services sector might be uneven.