Quarterly Statement by the Council of Financial Regulators – September 2025
The Council of Financial Regulators (the Council) held its regular quarterly meeting on Monday, 1 September 2025.
The Council is the main coordinating body for Australia's financial regulators, with the ultimate aim 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).
Economic Reform Roundtable and CFR Review implementation
The Australian Competition and Consumer Commission (ACCC) joined the Council for a discussion on the Economic Reform Roundtable sessions and the implementation of the CFR Review into Small and Medium-sized Banks.
The Council and the ACCC discussed the recent Economic Reform Roundtable sessions, and the importance of taking a holistic approach to financial regulators' commitments to support productivity. The Council agreed to coordinate agencies' next steps following the Roundtable.
The Council also noted the recently released CFR Review into Small and Medium-sized Banks, and the Government's response to its recommendations. The Council and ACCC were updated on the actions CFR agencies will take to better support competition from small and medium banks and will work closely with the Government to support the implementation of the recommendations.
Systemic risks and vulnerabilities
The Council discussed the international risk environment. Uncertainty in the global financial system remained elevated, reflecting a complex and rapidly evolving geopolitical and policy landscape. Over the past quarter, market volatility had subsided as some of the recent trade policy disputes appeared to be resolving, at least temporarily. However, fragmentation in the global trading system, very high global asset prices and leveraged investment strategies posed risks to the smooth functioning of international financial markets.
The Council noted that, against this backdrop, the Australian financial system continued to display a high level of financial resilience. This was underpinned by the banking sector's strong capital and liquidity positions, which provided a buffer if needed in periods of stress. Borrowers also continued to display a high level of resilience, despite ongoing budget pressures. The Council also agreed that amid an uncertain outlook, the environment for operational and cyber resilience had continued to deteriorate, with cyber threat activity increasing.
Conditions in the international and domestic environment reinforced the importance of existing Council priorities aimed at strengthening crisis preparedness, including for geopolitical, operational and liquidity risks. The Council also noted the emergence of deeper shifts in the international financial system that would need to be closely monitored, including the rise in sovereign debt levels and possible fragmentation in trade and capital flows.
Macroprudential policy
The Council discussed the outlook for housing-related risks to financial stability. In the context of declining interest rates, the RBA provided advice on financial stability, noting that it was supportive of APRA's recent decision to keep macroprudential policy settings unchanged given any loosening could amplify macro-financial vulnerabilities. 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 further noted that although lending standards were currently sound, it was important to be forward-looking and prepared for potential risks at future points in the financial cycle. Accordingly, as announced in July, APRA was engaging with regulated entities on implementation aspects of a range of macroprudential tools, to ensure they could be activated in a timely manner if needed. As well as the serviceability buffer, these tools included limits on new high debt-to-income lending, and limits on new investor or interest-only loans.
Climate-related initiatives
The Council was provided with an update on the climate and sustainability-related initiatives undertaken by the CFR agencies and coordinated through the CFR Climate Working Group. The Council noted that navigating a more complex international environment in a way that supported such initiatives was a key challenge. The Council also supported the efforts of financial system participants in engaging with climate-related initiatives without undue regulatory burden.
Members noted that the CFR's planned initiatives are aligned with the Government's Sustainable Finance Roadmap, aiming to enhance the ability of financial market participants to effectively manage climate-related risks and opportunities. The Council was also updated on progress in APRA's Insurance Climate Vulnerability Assessment.
Other initiatives
The Council discussed a range of other topics, including preparations for the upcoming International Monetary Fund's Financial Sector Assessment Program, and together with the ACCC, wholesale cash distribution issues.
Council of Financial Regulators
The Council is the main coordinating body for Australia's financial regulators. 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 Governor of the RBA chairs the Council, and the RBA provides secretariat support. The Council facilitates cooperation and collaboration across member agencies, with the ultimate aim of promoting the stability of the Australian financial system and supporting effective and efficient regulation. In pursuing this aim, the Council also seeks to support competition in the financial system.
The Council is a non-statutory body and has no legal functions or powers separate from those of its individual member agencies. It is a forum for cooperation, underpinned by the commitment of its member agencies to be open, proactive and collaborative. It meets each quarter, or more often if required. For more information, see: www.cfr.gov.au.