RBA warns financial industry to prepare for 'more shock-prone future'

Australia's financial industry should prepare for 'more shock-prone future', RBA warns Wed 17 Jun 2026 at 5:30pm In short: A new era of strategic uncertainty has serious implications for Australia's financial industry, the Reserve Bank has warned. Financial institutions need to prepare for a "more shock-prone future" as the international financial order potentially experiences a major realignment in the age of foreign interference and cyber attacks. What's next? Brad Jones, the RBA's assistant governor (financial system), says the Council of Financial Regulators wants to help Australia's financial industry prepare for a more uncertain future. Australia's financial industry needs to prepare for a "more shock-prone future" in the age of foreign interference and cyber attacks, a Reserve Bank official has warned. The new era of strategic uncertainty has serious implications for Australia, and the financial industry has to develop more crisis and contingency plans for extreme, but plausible, geopolitical scenarios, he said. Brad Jones, the RBA's assistant governor (financial system), has told Australia's corporate leaders that for much of the past generation, financial system participants in Australia may have safely ignored geopolitics, but that was becoming increasingly difficult. "It is critical that contingency planning efforts are directed at maintaining a minimal level of service provision in periods of stress," he warned. "It is in our collective interest to prepare for a financial system that is more shock-prone in the future,"he said. He said the Council of Financial Regulators (CFR) had been working hard to ensure that Australia's financial system was capable of weathering extreme potential shocks, but more work was needed. He made his comments in a speech to the Australian Banking Association Conference in Melbourne on Wednesday. The global financial order is changing, cyber risks are growing Mr Jones said the international financial order might be experiencing a major realignment, with financial and economic linkages being reshaped by strategic considerations. "Some indicators suggest a fracturing is occurring on a scale and with a speed unseen in eight decades, others less so," he said. But he said on top of that issue, Australia's financial industry will have to adapt to a new world in which threats from technology and cyberspace are much more common. He said international relations scholars had often wondered if finance and technology might emerge as the key focal points of strategic competition, beyond the traditional battleground, and their concept of an "alternative battle space" was coming into its own today. Mr Jones said since finance and technology were omnipresent in our daily lives, they had become "the epicentre of grey zone activity." "As our security agencies have emphasised, coercion is increasingly occurring just below the threshold of conflict and cyber operations have become a tool of modern statecraft," he said. Mr Jones said attacks on critical financial infrastructure were increasingly part of modern life, and rapid advances in artificial intelligence (AI) and quantum computing were only adding to the challenges. "It is in this context that policy makers are dialling up efforts to ensure the financial system can weather a more challenging risk environment,"he said. "Two developments are tilting the offensive-defensive balance in favour of offensive cyber capabilities: a widening attack surface as more activity becomes digital, and the pitting of state-backed resources against those of private enterprise," he said. Use of financial sanctions surges in recent years Australia's corporate leaders are also having to navigate the increasing imposition of financial sanctions in international trade. Mr Jones said the use of financial sanctions had soared in recent years, and it meant that financial institutions were increasingly exposed to "significant legal and business risk" if they wanted to engage in cross-border trade and investment. "[Sanctions] imposed by the United Nations Security Council are legally binding under international law and have been considered a legitimate tool for maintaining international order," he said. "While sanctions increased steadily at the global level in the decades after the Second World War, over the past decade or so, a number of new trends have emerged — notably a step up in the use of counter-sanctions and sanction-evasion techniques. "These require a new level of compliance capability from financial institutions operating across borders." More than 120 countries were subject to financial sanctions as of 2023, which is twice the number from a decade ago and a higher figure than for trade sanctions. "Financial sanctions accounted for just 12 per cent of all sanctions in the 1950s, but over the past decade or so that figure has risen to 42 per cent," Mr Jones said. "More than 70 countries across every major geographical bloc now impose sanctions outside of the formal United Nations process. Critically, targeted entities are using more sophisticated strategies to evade sanctions. "All of this makes financial institutions increasingly exposed to significant legal and business risk if they get it wrong." Mr Jones said the question of whether a more contested strategic environment could see the international financial system fragment along geopolitical lines had also become an area of growing focus for financial regulators. "My overall reading is that fragmentation is unfolding in some respects, less so in others — it very much depends on the context," he said. Some progress, but more work needed Overall, Mr Jones said Australia's corporate boardrooms had to engage "much more intensively" on these issues. He said for many decades, the major risks to a country's financial stability were thought to be cyclical and generated from within the financial system. But these new issues were structural and originating from outside the system, and they required fresh thinking. "If finance and technology are emerging as the epicentres of a more contested strategic environment, it will call for a more holistic approach to risk management," Mr Jones warned. "Our work with industry suggests some progress has been made, but it has been uneven, and there is much still to do. "There needs to be contingency planning under more extreme scenarios, more demanding fire drills, more intrusive interrogation of third-party dependencies, and more robust continuity and recoverability arrangements. "My colleagues and I at the RBA and on the CFR are committed to working constructively with industry to ensure our financial system can withstand a more shock-prone future. "But time is of the essence, and Australians are depending on all of us here to get this right," he said.