On 21 May 2026, the Australian Prudential Regulation Authority (APRA) issued the latest edition of its System Risk Outlook report.
The System Risk Outlook report provides an overview of risks and vulnerabilities affecting the financial system from the perspective of Australia’s financial safety regulator.
Highlights include:
- Australia’s financial system is resilient and well-positioned to support the economy in a downturn. For example, stress testing shows the system can withstand ‘severe but plausible’ shocks, including a deep global economic downturn combined with higher funding costs and operational disruptions.
- Cyber and technological risks are intensifying, and governance needs to keep pace. For example, Artificial intelligence (AI) is being adopted rapidly across all regulated industries and APRA has recently reinforced its expectations for sound AI governance and risk management via a letter to industry. Cyber threats are becoming more sophisticated and are increasingly shaped by geopolitical developments. APRA’s letter to industry emphasises the need to continue strengthening cyber defences.
- Risks from private credit appear contained domestically but are growing abroad, with potential spillovers to Australia. For example, Australian institutions are exposed to offshore developments in private markets through multiple channels, creating potential spillover risks that warrant close monitoring. While system-wide risks from domestic private credit remain contained, regulated entities are globally connected and therefore exposed to developments overseas. APRA has recently reinforced expectations around valuation governance, investment governance and liquidity risk management for superannuation funds investing in unlisted assets.
The next edition of the System Risk Outlook will be published towards the end of the year.