The Council of Financial Regulators (CFR) was established in 1998 as the successor to the Council of Financial Supervisors, which had been in operation from 1992. The CFR's collaborative, non-statutory structure was recommended by the 1997 report of the Financial System Inquiry (Wallis Committee). The Wallis Committee did not favour creating a statutory charter for the CFR as this could suggest that the CFR had regulatory functions separate from those of its members. Instead, the Wallis Committee argued that the CFR should have the aim of facilitating close cooperation among its members. It saw the CFR as the collaborative dimension of the regulatory agencies' activity. It did not see the CFR as a separate body with the ability to force cooperation among regulatory agencies.

The CFR was originally established with only three members: the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC), and the Reserve Bank of Australia (RBA). In 2003, the Treasurer announced that the Treasury would join the CFR. This followed major changes to Australia's financial regulatory structure, brought about by the recommendations of the Royal Commission into the failure of HIH Insurance. At that time, the CFR Charter was also revised to provide a stronger focus on stability issues, including the promotion of coordination arrangements between regulators for handling episodes of financial instability. In March 2004, the RBA began publishing a semi-annual Financial Stability Review. Alongside the RBA's assessment of the state of the financial system, each Review discusses activities of the CFR.