Brad Jones: Emerging threats to financial stability – new challenges for the next decade

Speech by Mr Brad Jones, Assistant Governor (Financial Markets) of the Reserve Bank of Australia, at the Australian Finance Industry Association Conference, Sydney, 31 October 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Introduction

'May you live in interesting times' is a sardonic curse with uncertain origin. Similarly uncertain is what the next decade might have in store for policymakers and participants in the financial system – what new risks and opportunities might emerge, what their impact might be and how they might interact. In the spirit of today's conference, I will step back from the conjunctural outlook to discuss some of the emerging challenges to global and domestic financial stability that could be with us for many years.

To spare any suspense, I have two punchlines.

First, the nature of the emerging risks we are likely to confront over the next decade have a different complexion to those of recent decades (Table 1). Some of these risks could originate from within the financial system, such as the risk of rapid-fire deposit runs in the digital age, spillovers from entities that (individually) are not systemically important and higher interest rate volatility. Importantly, other emerging risks are emanating from outside the system – geopolitics, operational risk and climate change – and for which there is no historical precedent to guide us.