‘Highly uncertain international environment’ poses risks for financial regulators
Australia’s financial regulators are vigilant about evolving geopolitical tensions and intensifying cyber risks, the Council of Financial Regulators has said.
Despite rising global uncertainty, the Council of Financial Regulators has said Australia’s financial system remains stable and resilient in its March quarterly statement.
The Council of Financial Regulators, made up of financial authorities APRA, ASIC, the RBA and the Australian Treasury, seek to promote stability in Australia’s financial system.
“The Council discussed the highly uncertain international environment, where geopolitical tensions and policy uncertainty were magnified and the intensity of cyber risks had increased,” its quarterly statement said.
Low risk premia in financial markets and a growing use of leverage in global markets have increased the risk of disorderly corrections in asset prices, according to the council.
Given the circumstances, the financial regulators said that banks and financial institutions should remain vigilant and create robust contingency plans to prepare for global shocks.
Crisis simulation exercises undertaken by Australian and New Zealand agencies through the Trans-Tasman Council on Banking Supervision found a need for strong and effective inter-agency coordination and communication channels.
Domestic conditions appeared relatively stable, according to the council. Declining inflation and a robust labour market supported resilience across households and businesses, however, some continued to face significant financial challenges, the council said.
Despite household budget pressures, borrowers appeared to be managing the costs and loan arrear rates remained contained.
The regulators assessed Australian banks to be “highly resilient and well positioned to continue to support economic activity, owing in part to strong levels of capital and liquidity.”
Overall, the quarterly review found that evolving geopolitical risks could pose risks to the Australian financial system, requiring commensurate vigilance from banks and institutions.
However, low arrears rates and a robust banking system indicated no imminent domestic threats to financial stability, the council found.
