The current stability of Australia's financial system is assessed in this report. It finds both the Australian and global systems have displayed a high level of resilience in the face of recent shocks. However, strengthening preparedness for potential crises and geopolitical risk is increasingly important. 

Key findings

• Risks to the Australian financial system from lending to households, businesses and commercial real estate have remained contained.
• Australian banks’ resilience has been supported by a long period of prudent lending standards, the high quality and quantity of capital, and large liquid asset buffers.
• Heightened geopolitical tensions and policy uncertainty in major economies has the potential to interact with existing vulnerabilities.
• The Australian financial system is well placed to continue to provide vital services in the event of a severe downturn.
• Looking further ahead, resilience could be undermined if lending standards deteriorate and households respond to an actual or anticipated easing in financial conditions by accumulating excessive debt.
• Strengthening crisis readiness and cyber and operational resilience in the Australian financial system is a regulatory priority.
• Strengthening preparedness for the potential impacts of geopolitical risk is increasingly important.