Brad Jones, Assistant Governor for the financial system at the Reserve Bank of Australia (RBA), has urged Australian financial institutions to prepare for a 'more shock-prone future' due to evolving global geopolitical dynamics. Speaking in Melbourne, Jones highlighted that while past risks to financial stability were largely considered cyclical, new structural challenges including heightened geopolitical tensions, increased use of financial sanctions as a tool of statecraft, and the growing threat of cyberattacks demand a more proactive and holistic approach to risk management. He emphasized that the global architecture, from historical agreements to current power bloc dynamics, directly impacts financial systems, and a period of relative calm following the Cold War has given way to renewed tensions.
Jones noted a significant increase in financial sanctions, now accounting for 42% of all sanctions over the past decade, up from just 12% in the 1950s. As of 2023, over 120 countries were subject to financial sanctions, double the number from a decade prior, creating substantial legal and business risks for institutions engaged in cross-border trade. He also pointed out the escalating threat of cyber-attacks, with a widening "attack surface" and state-backed resources targeting private enterprises, making finance and technology "epicentres of a more contested strategic environment." Advances in AI and quantum computing are further exacerbating these challenges.
The RBA and the Council of Financial Regulators (CFR) are working with the industry to enhance preparedness. Jones stressed the importance of contingency planning for extreme scenarios, more demanding "fire drills," intrusive interrogation of third-party dependencies, and robust continuity and recoverability arrangements to maintain a minimal level of service during stress periods. He acknowledged that while some progress has been made, it has been uneven, and significant work remains to be done. Jones concluded that Australia's financial system must collectively prepare for this uncertain future, as the consequences of inaction could extend beyond the financial sector to broader social cohesion.
