The Australian Prudential Regulation Authority has published the findings of its first System Risk Stress Test, which examined how links between the banking and superannuation sectors could transmit or absorb stress. The 2025 exercise, involving the four major banks and six large superannuation funds, applied a severe but plausible scenario that combined bank liquidity pressure beyond anything seen in the past 50 years, superannuation member withdrawals and switching above COVID-19 levels, and an operational disruption at a material service provider. All participating institutions were able to withstand the shock and rebuild liquidity over the test period. The results also showed that superannuation funds can either amplify bank stress by withdrawing funding in an idiosyncratic liquidity event or dampen broader system stress by providing equity capital to banks in a downturn. The findings identified vulnerabilities that could intensify future shocks, including concentration in bank funding from superannuation funds, mismatched assumptions between firms about the stability of deposits and short-term bank debt, and shared dependence on major service providers. Superannuation funds met liquidity needs mainly by selling listed equities and avoiding unlisted asset sales, which reduced immediate pressure on domestic markets but increased some members' exposure to liquidity, valuation and sequencing risks tied to unlisted assets, particularly in MySuper options. APRA also found that superannuation funds need stronger severe-stress testing and operational risk capabilities to match their growing systemic importance, while banks also have areas to improve. APRA said the results will inform proposed amendments to bank liquidity requirements that it plans to release for consultation during 2026, as well as core supervisory work for banks and superannuation funds. The findings also reinforce its focus on material service provider arrangements and its intention to continue system-wide and exploratory stress testing across regulated sectors.
Australian Prudential Regulation Authority2026-06-30
Australian Prudential Regulation Authority publishes inaugural cross-sector stress test findings showing resilience and system vulnerabilities
The Australian Prudential Regulation Authority has published findings from its first cross-sector System Risk Stress Test covering major banks and large superannuation funds. All participants withstood the severe scenario, but the exercise exposed vulnerabilities in funding concentration, behavioural assumptions and shared service provider dependencies. APRA will use the results to shape a 2026 consultation on bank liquidity rules and its supervision of banks and superannuation funds.