Quarterly Statement by the Council of Financial Regulators – June 2025

The Council of Financial Regulators (the Council) held its regular quarterly meeting on Wednesday, 11 June.

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 the risk environment, with a focus on international developments and the implications for the Australian financial system. Recent months had been marked by rapid changes in international trade policies, volatility in global financial markets and increased geopolitical tension. The Council noted that, although riskier asset prices had largely recovered from their sharp declines following the initial U.S. tariff announcements in early April, financial markets remained vulnerable to further shocks in the current international policy environment.

While domestic financial markets had continued to function without significant dislocation over recent months, liquidity conditions in April were affected and Council agencies continued to closely monitor conditions. The Council noted that the high level of resilience in the Australian financial system had been underpinned by strong levels of capital and liquidity which would provide a buffer if needed in periods of stress. The Council also agreed that it will be important for financial institutions to maintain the ability to withstand shocks and strengthen crisis preparedness for a range of scenarios, including geopolitical and operational shocks.

Developments over the past quarter also reinforced the importance of existing Council priorities aimed at strengthening crisis preparedness. These priorities included improving the resilience of the financial system to geopolitical risks, enhancing the operational resilience of financial institutions, and deepening understanding of and preparedness for liquidity shocks that could transmit across the system. The Council noted that CFR agencies have access to a comprehensive suite of policy tools they could use to respond in a crisis, if needed.

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 discussed the importance of promoting competition in the banking industry, and noted that the extent of competition varies across different market segments. The Council also noted the challenges facing different segments of the industry. These challenges include cost pressures from the need to continue to invest in technology, risk management and regulatory compliance.

Based on the feedback from stakeholders received through the Review consultation, the Council discussed policy changes that could better support competition, including introducing greater proportionality in certain areas of regulation, and measures to facilitate entry, sustainability and growth for small and medium-sized banks. The Council planned to provide a final report to the Government by 1 July 2025, with recommendations for consideration by the Government and commitments from relevant agencies.

Geopolitical risk

Recent international developments appear to be accelerating the pace of global fragmentation, contributing to greater complexity and volatility in the international environment. In this context, the Council reviewed the progress that has been made on its inter-agency work program, which aims to strengthen the resilience of the financial system to a range of geopolitical scenarios.

The Council noted that agencies had increased engagement with relevant government departments and other peer agencies on geopolitical risk to support information sharing and response coordination. The Council also noted the progress in joint work with industry on scenario planning and operational resilience, including in the payments system.

Housing-related risks

The Council discussed the outlook for housing-related risks to financial stability, and how systemic risks and vulnerabilities could evolve in the context of potential changes in the interest rate environment. The Council observed that while lender and borrower resilience is currently high, this strength could be eroded over time if lending standards deteriorated and households respond to an actual or anticipated easing in financial conditions by accumulating excessive debt. APRA continues to closely monitor lending standards and the broader operating environment.

Other initiatives

The Council was updated on a review of the challenges in estimating, reporting and disclosing sustainability data and potential actions to address these. The Council also discussed a range of other issues, including wholesale cash distribution issues, financial market infrastructure and public and private markets.

Council's Charter

The Council is undertaking a review of its Charter to reinforce cooperation arrangements, clarify the outcomes it is seeking to achieve, and reflect developments in its operating model in recent years. The updated Charter, and related memorandum of understanding on crisis management arrangements, will be published in July.

Annual meeting with other regulators

The Council also held its annual meeting with the Australian Competition and Consumer Commission (ACCC), the Australian Taxation Office (ATO) and the Australian Transaction Reports and Analysis Centre (AUSTRAC). The Australian Financial Security Authority (AFSA) also participated in this year's meeting.

The agencies discussed how they are addressing challenges posed by the current operating environment – which included heightened operational, cyber and geopolitical risks – amid a focus on proportionality in regulation.

The agencies also reviewed the Regulatory Initiatives Grid (RIG), which lists announced and publicised reform priorities and initiatives that will materially affect the financial sector over the next two years. Regulators agreed that it would be important not only to maintain transparency on changes to the financial sector regulatory landscape, but also to continue to enhance engagement and coordination across agencies on regulatory change to ensure it can be effectively managed by industry without undue burden.

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.