The Australian Prudential Regulation Authority and Reserve Bank of New Zealand have completed the 2026 Trans-Tasman Stress Test, their first joint exercise since 2017. The results indicate that both banking systems would remain resilient through a severe economic downturn, with banks continuing to provide credit to households and businesses despite substantial losses and pressure on capital and liquidity. The scenario combined escalating regional geopolitical tensions, an oil price shock and deep recessions in Australia and New Zealand. It also included falling property prices, sharply higher unemployment, a funding shock, market closure and a cyberattack on a bank-owned offshore operation. The coordinated approach allowed the regulators to assess cross-border risks, recovery actions and links between Australian parent banks and their New Zealand subsidiaries under a common scenario, while participating banks reported a lower regulatory burden. The regulators will use the findings in future supervision, risk assessments, crisis management and stress testing, and will consider conducting joint exercises more regularly. The Reserve Bank of New Zealand has published detailed findings for New Zealand banks, while APRA plans to release its detailed findings later in 2026 after engaging with participating banks.
Australian Prudential Regulation Authority and Reserve Bank of New Zealand find banks resilient in first joint stress test since 2017
The Australian Prudential Regulation Authority and Reserve Bank of New Zealand found that both banking systems would remain resilient under a severe cross-border stress scenario, with banks continuing to extend credit despite substantial losses and capital and liquidity pressure. The first joint exercise since 2017 examined economic, funding, market and cyber shocks and will inform future supervision, crisis management and stress testing.