Higher Risk of Cyberattacks in Australia may upset Financial Stability

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The banking and financial sector in Australia is set for turbulent times ahead, plagued by several risk factors threatening its stability. One such key concerns that has been categorically pointed by the Reserve Bank of Australia (RBA) is the increased risks of cyberattacks, apart from the slump in global growth. The concerns were revealed in 10th Annual Commonwealth Bank Global Markets Conference held recently in Sydney. This is evident in the growing complexity and the veracity with which cyberattacks have been targeting information systems of institutions in recent times all over the world. The repercussions for the Australian economy could be wide and serious, as revealed by the RBA assistant governor, Michele Bullock.

Annual Reports of Major Australian Banks flag increased Risks of Cyberattacks

Financial institutions are high on risk of such attacks and the concerns have been reiterated in the annual reports of several prominent Australian banks in recent times. Its financial sector could witness the risk of cyberattacks in variety of ways: data breach and attack, data manipulation, and large disruptions in payment systems of the economy. If the risks continue unmitigated in the coming years, this could lead to loss of trust of households in the overall banking system of the country, ultimately causing liquidity crunch, warns Bullock.

Regulators have taken several Measures that could mitigate Risks in Medium-term

If these domestic factors were not enough, global growth is sharply beset by rising trade tensions and the overall financial instability, notably in China. The aftermath is constraining offshore funding for banks.  However, regulators are keeping a close tab on the balance sheets of financial institutions in the country. Lending standards over the past decade have gone overhaul and help widespread financial stress. Recent measures taken by regulators have helped in establishing robust capital positions for the country’s financial system, adds Bullock.

Having said that, the gains can be offset if the downturn is huge. In recent years, remediation costs and fines have adversely affected banks’ profits. To top it all, debt financing by non-authorized deposit-taking institution (non-ADI) lenders pose substantial risks, if not monitored well.

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