Quarterly Statement by the Council of Financial Regulators – June 2026
The Council of Financial Regulators (the Council) held its regular quarterly meeting on Monday, 22 June 2026. 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).
The Australian financial system has remained resilient, but international risks are elevated
The Australian financial system has maintained a good degree of financial resilience in recent months, with banks maintaining strong levels of capital and liquidity and prudent lending standards. Council members assessed that most households and businesses remained able to manage increased cost pressures given their strong financial positions, although some may face challenges. The Council supported APRA's decision to maintain its current macroprudential policy settings in May, following its latest review of system risks.
Nevertheless, the Council agreed that the outlook for financial stability warranted a high degree of vigilance. In discussing the international risk environment, the Council assessed that global financial stability risks remained elevated amid heightened geopolitical uncertainty and a more complex environment for operational risk.
Geopolitical risks are elevated
The Council has met regularly since the outbreak of the conflict in the Middle East to ensure there is strong collective oversight of the risks that could emerge in the financial system. The Council assessed that the outlook remained fragile. Direct exposures of the Australian financial system to the Middle East region were limited, but developments over recent months reinforced the importance of strengthening system preparedness for a range of geopolitical scenarios, including those that could have a more severe impact domestically.
The Council reviewed progress on its inter-agency 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 expects financial institutions to continue strengthening contingency planning, including back-up payments arrangements, security controls and communication protocols, to put crisis preparedness arrangements on a stronger footing. APRA reported that it had written to its regulated entities to set out expectations for geopolitical risk management, following recent RBA and APRA communications that highlighted the range of risks that need to be managed in a more uncertain international environment.[1]
Frontier AI is compounding a more fraught environment for operational risk
The Council observed that the development of frontier AI models represented a step change in the threat landscape for the financial system, and has intensified cyber risk for financial institutions. This has occurred in an environment of already heightened cyber threats, given ongoing technological developments and elevated geopolitical tensions. Members noted that APRA and ASIC had written to their regulated entities to call for a step-change in the management of cyber and AI-related risks.
In this context, the Council invited the Department of Home Affairs (HA) and the Australian Signals Directorate (ASD) to discuss the rapidly evolving cyber threat landscape. The Council, HA and ASD discussed ways in which CFR agencies and security agencies could strengthen strategic engagement and coordination on incident response, mitigate third party risks and the importance of Australian financial institutions strengthening their cyber defences, including through accelerated patching, reducing attack surfaces and maintaining robust baseline cyber-security practices.
The Council also recognised the significant efficiency and capability benefits technological advancements can bring to the financial system.
Other initiatives
The Council met with the International Monetary Fund's (IMF) Mission representatives to discuss the progress of Australia's 2026 Financial Sector Assessment Program (FSAP). The FSAP provides a comprehensive, in-depth analysis of the resilience of a country's financial sector. The Australian FSAP will conclude later in the year with a Financial System Stability Assessment report.
The Council, together with the ACCC, reviewed implementation progress on actions taken by CFR agencies in response to the CFR Review into Small and Medium-sized Banks.
The Council, together with the ACCC, also considered wholesale cash distribution issues, including policies and initiatives to support the availability and affordability of cash in Australia. In May, Treasury concluded its consultation on draft legislation for a cash distribution regulatory framework, which was informed by recommendations from the Council and the ACCC. The proposed framework aims to support a sustainable, efficient and resilient cash distribution system, so that cash is available for those who need and want to use it.
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 the meeting.
The agencies outlined 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. They also discussed the impact of frontier AI models on their regulated communities and steps being taken to enhance resilience.
More broadly, agencies continue to work together on an ambitious regulatory reform agenda, aiming to improve efficiency without compromising financial system stability. In May 2026, ‘CFR Plus’ agencies (CFR agencies, ACCC, ATO, AUSTRAC and AFSA) published an implementation plan for regulatory reform commitments, which covered specific commitments to streamline data collection. The agencies also reviewed progress on implementation across the roadmap for better regulation.
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.