Quarterly Statement by the Council of Financial Regulators – March 2025

The Council of Financial Regulators (the Council) held its regular quarterly meeting on Thursday, 13 March.

The Council is the main coordinating body for Australia's financial regulators, with the ultimate objective of promoting the stability of the financial system and supporting effective and efficient regulation. It brings together the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC), the Australian Treasury and the Reserve Bank of Australia (RBA).

Systemic risks and vulnerabilities

The Council discussed potential sources of systemic risk and key vulnerabilities facing the Australian financial system, in the context of a highly uncertain international outlook.

The Council discussed the highly uncertain international environment, where geopolitical tensions and policy uncertainty were magnified and the intensity of cyber risks had increased. Low risk premia in financial markets, coupled with the growing use of leverage in some areas of global markets, increased the likelihood of disorderly corrections in asset prices in the event of adverse shocks. Members agreed that a high level of vigilance among banks and other financial institutions was appropriate in the circumstances, alongside robust contingency plans.

The Council noted that while household budget pressures were widespread across the Australian community, the vast majority of borrowers were managing these pressures and so loan arrears rates remained contained. The decline in inflation and continued strength in the labour market were supporting the resilience of most households and businesses, although some continued to face significant challenges. The Council’s assessment remained that banks were highly resilient and well positioned to continue to support economic activity, owing in part to strong levels of capital and liquidity. The Council also discussed the implications of different interest rate environments for financial stability, and noted the importance of being ready both to respond to any immediate risks and to prevent vulnerabilities building in the financial system over time.

The Council noted that these themes would be explored in more depth in the RBA’s forthcoming Financial Stability Review.

Cyber and operational resilience

The Council was updated on the outlook for cyber and operational risks. These risks were increasing in scale and complexity as operating models adapted and evolved, and reliance on technology and third-party service providers increased. The Council agreed to continue its important shared program to strengthen cyber and operational resilience in the financial system, with a particular focus on better understanding service provider concentration risks, testing crisis management and cyber defence plans, and building back-up payments capabilities.

Crisis preparedness

The Council reviewed its approach to planning and coordinating crisis simulation exercises in various key risk areas, to ensure there were regular fire drills of inter-agency crisis management arrangements. The Council noted the lessons learned from the crisis simulation exercise undertaken by Australian and New Zealand agencies through the Trans-Tasman Council on Banking Supervision (TTBC) last year, including the need for strong and effective inter-agency coordination arrangements and communication channels.^[1] The Council agreed to continue to strengthen crisis preparedness arrangements, including through targeted testing of coordination protocols.

Sustainability-related data

The Council was updated on the CFR Climate Working Group project on sustainability data, which covers issues such as estimations of scope 3 emissions as inputs in financial decision-making. The Council noted the challenges facing financial system participants in estimating, reporting and disclosing such data, given that this is a complex and evolving area with a range of tools, methods and standards.

CFR Review into small and medium-sized banks

The Council was provided with an update on the Review into small and medium-sized banks, conducted with the Australian Competition and Consumer Commission (ACCC). The ACCC joined the Council for this update. The aim of the Review was to identify ways of better supporting competition while balancing other objectives, including financial stability.

The Council noted that there had been a wide range of feedback and issues raised by stakeholders in the recent consultation process, which closed in early February. These covered proposals for adjustments to the regulatory and legislative frameworks to enhance proportionality and transparency, including in relation to reporting requirements. The Council discussed the importance of developing a fact basis on the issues raised and impactful final recommendations.

Following further review of the consultation submissions, the Council planned to provide a final report to the Government by 1 July 2025, with recommendations for consideration by the Government and relevant agencies.

Other initiatives

The Council discussed a range of other issues, including its geopolitical risk program, wholesale cash distribution issues and the central clearing of bonds and repos. The Council endorsed the publication of a Response to the Consultation on Reassessing the Case for Central Clearing of Bonds and Repos, which is available on the Council’s website. The Council also discussed work underway to update its Charter, to reinforce cooperation arrangements across agencies. An updated Charter will be published later this year.

Council of Financial Regulators

The Council of Financial Regulators (the Council) is the coordinating body for Australia's main financial regulatory agencies. There are four members: the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC), the Australian Treasury and the Reserve Bank of Australia (RBA). The Reserve Bank Governor chairs the Council and the RBA provides secretariat support. It is a non-statutory body, without regulatory or policy decision-making powers. Those powers reside with its members.

The Council’s objectives are to promote stability of the Australian financial system and support effective and efficient regulation by Australia’s financial regulatory agencies. In doing so, the Council recognises the benefits of a competitive, efficient and fair financial system. The Council operates as a forum for cooperation and coordination among member agencies. It meets each quarter, or more often if required.