The RBA has released their Corporal Plan for 2018/2019. In the section on Financial Stability they call out specific risks in the home lending market, relating to credit quality.
During 2018/19 to 2021/22, the main risks to financial stability will most likely continue to relate to credit quality. Notably, banks’ large exposure to a potential deterioration in housing loan performance is expected to remain a key issue, requiring ongoing monitoring by both banks and regulators.
They also highlight the role of the Council of Financial Regulators (CFR), and the issues raised by the Productivity Commission and Royal Commission:
The Reserve Bank works with other regulatory bodies in Australia to foster financial stability. The Governor chairs the Council of Financial Regulators (CFR) – comprising the Reserve Bank, the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC) and the Australian Treasury – whose role is to contribute to the efficiency and effectiveness of regulation and the stability of the financial system. The Bank’s central position in the financial system, and its position as the ultimate provider of liquidity to the system, gives it a key role in financial crisis management, in conjunction with the other members of the CFR.
The Reserve Bank will continue working with the other CFR agencies to support financial stability. In the period ahead this will be informed by the Financial Sector Assessment Program review of Australia being conducted by the International Monetary Fund during 2018. The Bank and other CFR agencies
will also carefully consider the implications for the resilience of the financial sector arising from findings and recommendations of the final report of the Productivity Commission’s review of competition in the financial system, as well as the outcomes of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The Bank will also continue working with APRA and with other regulators to monitor and, where necessary, respond to risks that may emerge from economic and financial shocks emanating from Australia or abroad.
