Council of Financial Regulators outlines key market trends

Addressing financial vulnerabilities

Council of Financial Regulators outlines key market trends


By Mina Martin

The Council of Financial Regulators held its regular quarterly meeting on June 7, discussing a range of vulnerabilities in the financial system and the measures being taken to enhance resilience and stability.

Monitoring of Australian households and businesses

The council continues to monitor the risks associated with lending to households and businesses.

Although inflation and interest rate pressures persist, leading to budget adjustments for many, the majority of borrowers have maintained their debt repayments.

However, the council noted a rising trend in mortgage delinquencies and financial hardship applications, albeit from a low base.

Geopolitical tensions and financial stability

The meeting also focused on the challenges posed by a complex geopolitical environment.

The council emphasised the importance of incorporating geopolitical risks into broader risk-management frameworks, given the potential for global economic fragmentation and financial system impacts.

Technological innovations and risks

Advancements in technology, particularly the increased adoption of artificial intelligence (AI), were discussed as both an opportunity for productivity gains and a potential source of new risks in the financial system.

The council agreed to continue monitoring AI’s integration within regulatory frameworks.

Findings from the CHESS Replacement Project

The council reviewed the Parliamentary Joint Committee report on the CHESS Replacement Project, which is vital for clearing and settlement competition.

The recommendations were supported, contributing to the government's response to enhancing competition and oversight in this area.

Challenges in cash-in-transit and regulatory coordination

Ongoing issues in the cash-in-transit industry, especially in regional and remote areas, were addressed, with commitments to work with government and industry for sustainable cash distribution solutions.

Updates on a forward-looking financial sector regulatory initiatives grid were also received, improving regulatory coordination.

Annual meeting with financial sector regulators

In its annual meeting with other financial regulators, including the ACCC, ATO, and AUSTRAC, the council discussed insolvency trends, changes in the financial services industry, and efforts to tackle scams and money laundering.

ATO detailed shifts towards regular debt recovery actions, while the ACCC's National Anti-Scam Centre outlined plans for enhanced scam detection and prevention.

Progress in anti-money laundering reforms

Significant updates on reforms to the Anti-Money Laundering and Counter Terrorism Financing (AML/CTF) regime were shared.

These reforms are crucial for helping Australian businesses and financial markets to effectively combat serious financial crimes, with ongoing stakeholder consultations aimed at ensuring the regime remains up-to-date and internationally compliant.

Role and function of the council

The council, comprising major financial regulatory bodies like APRA, ASIC, the Australian Treasury, and the RBA, serves as a coordinating platform to promote financial system stability and ensure efficient regulation. With the RBA governor as the chair, the council plays a pivotal role in aligning national financial policies and strategies.

By maintaining a vigilant watch over the financial landscape and fostering regulatory cooperation, the council aims to safeguard the stability and integrity of Australia’s financial system amidst evolving economic and technological challenges.

Read the council article in full here.

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