Quarterly Statement by the Council of Financial Regulators – December 2025

The Council of Financial Regulators (the Council) held its regular quarterly meeting on Monday, 1 December 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).

Regulatory reform initiatives

The Council reviewed progress in implementing the actions agreed to better support competition in the CFR Review into Small and Medium-sized Banks. The Australian Competition and Consumer Commission (ACCC) joined the Council for this discussion. The Council noted the steps that were being taken, including a number of consultations with industry and policy development on measures to introduce greater proportionality in regulatory frameworks, reduction in reporting requirements and simpler licensing.

The Council discussed the Treasurer's request for the CFR and other regulators, including the ACCC, the Australian Taxation Office (ATO), the Australian Transaction Reports and Analysis Centre (AUSTRAC) and the Australian Financial Security Authority (AFSA), to work together to develop a roadmap for better regulation in the financial system.

The Council agencies are working together on an ambitious reform agenda aiming to improve efficiency without compromising financial system stability. The Council discussed next steps to coordinate and sequence regulatory reform initiatives, including identifying opportunities to streamline and harmonise data collections, and identifying priority legislative reforms to support better regulation. The Council agreed to continue to engage with industry stakeholders on these important initiatives, and to publish a roadmap for better regulation in December. The roadmap will include over 50 commitments made as part of the economic reform roundtable to reduce regulatory burden over the next two years.

Systemic risks and vulnerabilities

The Council discussed the domestic and international risk environment. Against a backdrop of ongoing international political and economic uncertainty, the Australian financial system continued to display a high level of financial resilience. While lending standards have remained prudent to date, members noted that investor lending had increased noticeably and there was a pick-up in some forms of riskier lending. A material increase in riskier forms of lending in response to lower interest rates could contribute to a build-up in vulnerabilities. The Council noted the importance of pro-actively responding to prevent vulnerabilities building in the financial system over time. In this context, the Council supported APRA's recent decision to activate limits on high DTI lending to pre-emptively contain the build-up of housing-related vulnerabilities in the financial system.

The Council reviewed its key focus areas to address systemic risks and vulnerabilities facing the Australian financial system. Over the past year, the key focus areas for CFR initiatives had included geopolitical risks, operational vulnerabilities including cyber and reliance on third-parties, systemic liquidity risk, high household leverage and climate change. The Council noted that good progress had been made on a range of inter-agency initiatives to address these vulnerabilities, and endorsed the publication of a new report to provide greater transparency around these activities, which is available on the Council's website.

The Council discussed a range of emerging risks and challenges to financial stability, including the rise in global sovereign debt levels, the implications of fragmentation in the international system, and the opportunities and risks from Artificial Intelligence (AI). These developments reinforced the importance of many of the existing CFR focus areas. The Council agreed the following priorities for inter-agency collective action in 2026:

• Improving preparedness for geopolitical risks: progressing the CFR's work program with industry to ensure the Australian financial system is prepared for a range of potential geopolitical shocks.
• Operational vulnerabilities, including cyber, third parties and AI: continuing to advance initiatives to enhance the resilience of the financial system to operational vulnerabilities, with a focus on cyber threats, third-party dependencies and AI.
• Amplification of systemic liquidity risk: further strengthening CFR and industry readiness to respond to systemic liquidity stress events, with a focus on scenario testing and operational arrangements.
• High household leverage: continuing to closely monitor household leverage and bank lending standards, and coordinating to manage any policy interactions if needed.

The Council noted that in each of these priority areas, CFR agencies are taking forward a number of initiatives to strengthen the resilience of the financial system. In addition, CFR agencies affirmed their commitment to monitoring, assessing and (where relevant) coordinating actions to address a broader range of financial stability risks and vulnerabilities. This includes the challenges associated with climate change, the growth of private markets, innovations in digital money and assets, and the risks beyond the regulatory perimeter in non-bank financial intermediation.

Geopolitical risk

The Council reviewed progress on its work program with industry on geopolitical risk, which aims to ensure the Australian financial system is prepared for a range of geopolitical scenarios. The Council emphasised the importance of industry participants investing in their resilience to geopolitical shocks, including by strengthening contingency planning. The Council also discussed the steps that had been taken to strengthen its engagement with other agencies and with Government.

Private credit markets

ASIC presented an update on risks and trends in private credit markets, and their growing size and significance in the Australian financial system. While acknowledging that private credit had an important role in financing activity in the Australian economy, ASIC had observed that the governance, valuation and disclosure practices of some private credit providers fell short of industry best practice.

Other initiatives

The Council discussed a range of other topics, including preparations for the upcoming International Monetary Fund's Financial Sector Assessment Program, APRA's Insurance Climate Vulnerability Assessment, as well as Phase 1 of APRA's system risk stress test. The system risk stress test explores how systemic risks could transmit across banking and superannuation sectors, and Phase 2 will conclude in mid-2026 with a report on its findings. The Council also conducted an annual review of its operating model, with changes to its sub-groups to reflect its priorities for 2026. An updated organisation structure is available on the Council's website.

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.