Australia’s prudential regulator says the financial system is in good shape, but it is not taking that for granted. In his opening statement to the Senate Economics Legislation Committee, published on Thursday 29 October, APRA Chair John Lonsdale said the system “remains strong and stable”, before setting out a list of risks the regulator is watching closely.
“The risk of a significant market shock or correction remains, requiring continued vigilance and preparedness,” Mr Lonsdale said.
Where the risks are
Many of the threats are offshore. Mr Lonsdale pointed to armed conflicts, trade restrictions and great power competition, and noted that government debt and bond yields are high in several major economies while risk premia remain low in parts of global markets. “A sharp repricing could tighten financial conditions and have flow-on effects in Australia,” he said.
He also singled out artificial intelligence, describing it as “one of the fastest growing operational resilience risks for APRA-regulated entities”, because its rapid development is increasing cyber threats. APRA will assess how institutions manage their “concentrated reliance on common technology platforms and material service providers”, out of concern that a disruption at one large provider “would have an outsized impact on our financial system”.
Closer scrutiny of bank lending
At home, Mr Lonsdale said the housing sector and housing lending activity have cooled, and many households are under cost-of-living pressure from inflation and higher interest rates. “Most borrowers remain resilient and lending standards are sound, but we are watching lending standards and credit conditions closely,” he said.
APRA intends to carry out targeted thematic reviews of banks’ lending practices “to ensure they remain prudent, given the potential for less favourable economic conditions”, and will begin work on a new system-risk stress test examining links between sectors.
Enforcement and super
The statement also recapped recent enforcement. In August APRA launched its first civil penalty proceedings under the Financial Accountability Regime, and it has imposed licence conditions on a large regional bank over weaknesses in its non-financial risk management. In September it imposed licence conditions on a significant mid-size bank and required it to hold additional capital and liquidity after material breaches of minimum liquidity requirements.
In superannuation, APRA released a package of reforms in September to strengthen trustee investment governance, particularly for platform trustees. Its draft standard SPS 530 would, among other things, require trustees to set member-level investment limits for concentrated higher-risk options and to value investments at least quarterly. Consultation closes on 3 February 2027.
What it means for borrowers
Thematic reviews do not change lending rules on their own, but they tend to sharpen how lenders apply their existing policies. With APRA watching serviceability and credit conditions closely, business and property borrowers should expect lenders to keep scrutinising cash flow and buffers when facilities are renewed.
Sources: APRA, Opening Statement to Senate Economics Legislation Committee, October 2026 (published 29 October 2026); KHQ Lawyers Super Alert (30 October 2026); Global Regulation Tomorrow (8 October 2026).