Super sector an important source of resilience: RBA

The Reserve Bank of Australia (RBA) has released its latest Financial Stability Review, saying Australia has a "good degree of resilience".

The RBA said private market activity in Australia has supported favourable business credit conditions over recent years and noted while the rapid growth in the domestic private credit market has been from a low base, concerns over credit quality raise more issues for investor protection than financial stability.

"In sum, while cyclical domestic risks continue to be closely monitored, they are not assessed as posing systemic financial stability risks at present," it said.

On the superannuation sector, the RBA said it is important that as the sector grows, its liquidity risk management practices continue to strengthen to maintain resilience.

The central bank also noted operation resilience requires ongoing action.

"Improving operational resilience has become a prominent focus of regulators, banks, FMIs, superannuation funds and other financial institutions. This includes the development of robust contingency and recovery plans and crisis response capabilities. There is, however, a varying level of preparedness for operational disruptions across the financial system," the RBA said.

"In an environment of rapid technological change, increased concentration, rising interconnectedness and heightened geopolitical risk, maintaining and building operational resilience will require ongoing vigilance across the financial system.

The RBA added capital and liquidity resilience must be maintained.

"It is important that lending standards remain sound in the face of continued strong competition in lending so that resilience is not eroded in an environment more prone to shocks," the RBA said.

"The superannuation sector has been an important source of resilience and stability in the broader financial system over the years, but ongoing work to strengthen liquidity risk management practices is warranted as the sector continues to grow in size and as a larger share of superannuation balances become accessible to members."