Michele Bullock: Building financial sector resilience - a decade long transition

Speech by Ms Michele Bullock, Assistant Governor (Financial System) of the Reserve Bank of Australia, at the 10th Annual Commonwealth Bank Global Markets Conference, Sydney, 30 October 2018.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Thank you to the Commonwealth Bank for the invitation to speak to you today.

A couple of weeks ago, we released our October Financial Stability Review (FSR). In that, we concluded that the Australian financial system looks pretty resilient. Australian banks are well capitalised and profitable, and have sound lending standards and plenty of liquid assets. The major banks are already very close to meeting the Australian Prudential Regulation Authority's unquestionably strong capital benchmarks. This is good for the resilience of the banking sector in the face of any downturn.

Where the banks stand today reflects changes to the international regulatory framework over the past decade. The Global Financial Crisis (GFC) revealed inadequacies in bank capital and liquidity levels and risk frameworks, which resulted in an international effort to increase the resilience of the financial sector. Banks around the world have been required to increase the level and quality of their capital and mitigate liquidity risks. Systemically important institutions have been required to maintain additional buffers above these minimum requirements. There has also been a focus on better disclosure and transparency to facilitate an understanding of where risks might lie.