RBA warns financial industry to prepare for 'more shock-prone future'

If finance and technology become key focal points of geo-strategic competition, beyond the traditional battleground, will Australia's financial institutions be prepared? (Reuters: Kacper Pempel/Illustration)

A new era of strategic uncertainty has serious implications for Australia's financial industry, the Reserve Bank has warned.

Financial institutions need to prepare for a "more shock-prone future" as the international financial order potentially experiences a major realignment in the age of foreign interference and cyber attacks.

Brad Jones, the RBA's assistant governor (financial system), says the Council of Financial Regulators wants to help Australia's financial industry prepare for a more uncertain future.

Australia's financial industry needs to prepare for a "more shock-prone future" in the age of foreign interference and cyber attacks, a Reserve Bank official has warned.

The new era of strategic uncertainty has serious implications for Australia, and the financial industry has to develop more crisis and contingency plans for extreme, but plausible, geopolitical scenarios, he said.

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Brad Jones, the RBA's assistant governor (financial system), has told Australia's corporate leaders that for much of the past generation, financial system participants in Australia may have safely ignored geopolitics, but that was becoming increasingly difficult.

"It is critical that contingency planning efforts are directed at maintaining a minimal level of service provision in periods of stress," he warned.

He said the Council of Financial Regulators (CFR) had been working hard to ensure that Australia's financial system was capable of weathering extreme potential shocks, but more work was needed.

Mr Jones said the international financial order might be experiencing a major realignment, with financial and economic linkages being reshaped by strategic considerations.

"Some indicators suggest a fracturing is occurring on a scale and with a speed unseen in eight decades, others less so," he said.

Brad Jones says policymakers are "dialling up efforts" to ensure the financial system can weather a more challenging risk environment. (ABC News: Michael Janda)

But he said on top of that issue, Australia's financial industry will have to adapt to a new world in which threats from technology and cyberspace are much more common.

He said international relations scholars had often wondered if finance and technology might emerge as the key focal points of strategic competition, beyon