Key points
- The Australian Prudential Regulation Authority reported growing risks to financial system stability from global volatility and artificial intelligence.
- The regulator noted softening housing activity and higher household living costs alongside rising wholesale funding pressures.
- Financial institutions were instructed to strengthen operational resilience, capital buffers, and multi-issue crisis preparedness.
The Australian Prudential Regulation Authority released its latest bi-annual report outlining rising stability risks across 3 core operational and financial areas.
This assessment follows previous reviews confirming system strength, but the regulator stated that ongoing economic resilience can no longer be taken for granted.
"Australia's financial system remains resilient, but the risk environment is becoming less forgiving," said APRA Chair John Lonsdale.
The report detailed that home lending has slowed alongside declining property prices, while artificial intelligence adoption is accelerating cyber threats and operational exposure to third-party tech vendors.
The regulator noted that recent stress testing confirmed domestic institutions currently hold adequate liquidity to withstand combined financial and operational shocks.
APRA confirmed it will target crisis preparedness across banks, insurers, and superannuation funds under its multi-year corporate plan.
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