Brad Jones: Panel participation at the Regulators 2024
Speech by Mr Brad Jones, Assistant Governor (Financial System) of the Reserve Bank
of Australia, at The Regulators 2024 "Navigating Trans-Tasman financial challenges",
organised by FINSIA (Financial Services Institute of Australasia), Sydney, 8 November
2024.
* * *
Good afternoon, and thank you to FINSIA for the opportunity to discuss some of the
RBA's regulatory and supervisory priorities in our payments policy and financial stability
work.
Australia has a payments system that we can be proud of. By global standards, it is
fast, efficient and reliable. At the same time, the Australian payments landscape is
rapidly evolving, and there is always room for improvement. Alongside opportunities for
new business models and technologies to emerge, there are also some challenges for
the system. Regulators are leaning into these challenges and industry will need to as
well.
The Payments System Board is focused on fostering competition and innovation in a
regulatory environment that promotes the ongoing safety and security of the Australian
payments system. In overseeing the activities of clearing and settlement facilities with
our colleagues at ASIC, RBA staff and the Payments System Board (PSB) are equally
focused on ensuring that these critical operations are run in a way that supports the
stability of the Australian financial system. With this in mind, let me share with you the
PSB's five strategic priorities that were set out in the recently released Annual Report.1
Priority #1: Promoting the safety and resilience of payments and market
infrastructures
Australians increasingly depend on the availability of electronic payment systems, and
our financial system is reliant on the smooth functioning of market infrastructures.
The orderly migration of Bulk Electronic Clearing Service (BECS) payments to more
modern payment rails, such as the New Payments Platform (NPP), is of critical
importance, recognising that BECS has been Australia's primary system for
account-toaccount payments for over 30 years (facilitating most salary, welfare and pension
payments). The industry target date of 2030 is ambitious and will require a concerted
and coordinated effort by industry to meet. This effort must include close engagement
with a wide range of stakeholders. In the meantime, the RBA is conducting a risk
assessment to identify and understand how the transition risks are being managed.
Beyond BECS, and in light of the worsening cyber and geopolitical risk environment,
the operational resilience of Australia's payment systems is a principal focus for the
PSB. RBA staff are closely monitoring the ability of market infrastructures to upgrade
their technologies and manage these risks, including relating to third-party service
providers.
Priority #2: Supporting reforms of the regulatory framework for payments and
market infrastructures
As regulators need to have the powers to address emerging issues in the payments
system, the PSB continues to strongly support the Government's ongoing reforms to
modernise the regulatory framework. RBA staff are also operationalising our new crisis
management and supervisory powers for clearing and settlement facilities that featured
in the recent reforms to financial market infrastructure regulation.
Priority #3: Lowering the cost of card payments for merchants, especially small
businesses
The RBA recently launched a review of merchant card payment costs and surcharging.
Options under review include those aiming to reduce the level and complexity of
wholesale fees in card payments and promoting greater transparency for merchants.
The review is also examining whether limits need to be placed on surcharging.
Stakeholder submissions on these issues are invited by early December.2
Priority #4: Improving cross-border payments, which remain expensive, slow and
opaque
The PSB is encouraging the adoption of internationally harmonised messaging
capabilities and enhanced functionality for cross-border payments. A recent example
was the launch of the NPP's International Payments Service, which will significantly
speed up incoming cross-border payments. RBA staff also continue to examine options
for linking fast payment systems across countries.
Priority #5: Actively shaping the future of digital money
This is a clear priority for the PSB and also features in the RBA's Corporate Plan. In
September, we published a paper with Treasury that set out our assessment of the
case for central bank digital currency (CBDC) in Australia, and for the first time laid out
3
a three-year roadmap for future work. At present, we assess the benefits to the
economy as more promising, and the challenges less problematic, for a wholesale
CBDC compared with a retail version that would be available to the general public.
As I recently discussed, the RBA has made a strategic commitment to prioritise our
applied research on the role that CBDC could play in lifting the efficiency and resilience
4
of wholesale markets in Australia. To that end, we are about to invite responses to a
consultation paper on a new research project, Project Acacia. With industry partners,
we look forward to exploring how innovations in digital money and infrastructure could
increase the efficiency and resilience of wholesale markets where money and assets
are tokenised.
Broader financial stability risks
Before I turn the floor open to questions, it would be remiss not to briefly mention that
our focus on financial stability extends beyond the areas of payments and market
infrastructure. As I discussed last year, and as set out by recent editions of the
Financial Stability Review, we see risks to financial stability as taking two broad forms.5
Traditional cyclical risks generated from within the financial system
These include the effects of higher interest rates or an economic downturn on the
resilience of households, firms and banks. These types of risks have long featured in
our surveillance work and will continue to do so.
Non-cyclical risks generated from outside the financial system
These have become more prominent in recent times and there is generally little
historical precedent to guide us in navigating them. Foremost here are geopolitical
risks, operational risks (including but not limited to cyber risks) and the risks associated
with climate change.
Our assessment is that this second category of risks continue to build in troubling ways.
They not only have the potential to be systemic, but could also cut across the financial
system, economy and society in complex ways. For these reasons, the RBA and other
member agencies comprising the Council of Financial Regulators are stepping up the
intensity of work in these areas. At the same time, the worsening threat landscape -
which is more structural than cyclical in nature - requires industry to actively prepare for
a much more challenging operating environment in the years ahead.
Thank you.
1
RBA (2024), ' Payments System Board 2024 Annual Report '.
2
RBA (2024), ' Merchant Card Payment Costs and Surcharging ', Issues Paper,
15 October.
3
RBA and Australian Treasury (2024), 'Central Bank Digital Currency and the Future of
Digital Money in Australia ', September.
4
Jones B (2024), ' Financial Innovation and the Future of CBDC in Australia ', Speech at
the Intersekt Conference, Melbourne, 18 September.
5
See, for instance, RBA (2024), ' Financial Stability Review ', September; Jones B
(2023), ' Emerging Threats to Financial Stability - New Challenges for the Next Decade ',
Sydney, 31 October.