The Reserve Bank of Australia has published a Financial Stability Bulletin article setting out a framework for how geopolitical shocks could affect the financial system. It focuses on acute shocks rather than longer-term structural shifts and argues that geopolitical events can differ from conventional macro-financial stress by amplifying financial risks, creating new operational and security challenges, and making crisis management harder when multiple risks emerge at the same time. The framework identifies four transmission channels through which stress could spread: financial conditions, the real economy, safety and security, and international policy responses. It maps these to five core risk types: credit, liquidity, operational, security and capacity, and political risk. The article highlights risks such as faster liquidity shocks, including deposit runs triggered by disinformation, cyber-attacks on financial institutions and infrastructure, disruptions to payments and third-party service providers, and the effects of sanctions, capital restrictions and offshore asset seizures on funding, compliance and payment flows. It notes that Australian banks' direct international exposures are relatively small, with about 15 per cent of total assets offshore excluding New Zealand, but says domestic effects could still become material through tighter financial conditions, weaker activity and operational disruption. In Australia, the Council of Financial Regulators is working with industry on preparedness for geopolitical scenarios, while the Australian Prudential Regulation Authority, the RBA and the Australian Securities and Investment Commission are incorporating geopolitical considerations into routine supervisory and oversight work.
Reserve Bank of Australia2026-06-09
Reserve Bank of Australia outlines four transmission channels and five risk types for geopolitical shocks to financial stability
The Reserve Bank of Australia has outlined a framework for how acute geopolitical shocks could transmit to the financial system, distinguishing them from conventional macro-financial stress. The framework links four transmission channels to five core risk types and highlights risks such as rapid liquidity shocks, cyber-attacks, payment disruptions and the impact of sanctions and capital controls. It notes that Australian banks’ direct offshore exposures are limited but that domestic effects could still be material, and that the Council of Financial Regulators and key agencies are integrating geopolitical risk into supervisory and oversight work.