The Australian Prudential Regulation Authority (APRA) and the Reserve Bank of New Zealand – Te Pūtea Matua (RBNZ) have completed the 2026 Trans-Tasman Stress Test, their first joint stress testing exercise since 2017.
In conducting the stress test jointly, APRA and RBNZ sought to enhance cross-border regulatory collaboration in support of financial stability while also reducing regulatory burden for participating banks.
The results indicate the banking systems would remain resilient through a severe downturn in both economies. Notwithstanding substantial loss levels and pressure on capital and liquidity, banks continued to support households and businesses by providing credit throughout the stress period.
The stress test examined the hypothetical impact of an escalation in regional geopolitical tensions, a sharp oil price shock and a deep recession across Australia and New Zealand. Under the scenario, higher energy costs and weaker economic activity led to rising inflation, falling household incomes, a significant fall in property prices and a sharp increase in unemployment. It also included a funding shock, market closure and a cyber-attack disrupting a bank-owned offshore operation.
APRA Deputy Chair Therese McCarthy Hockey said close cooperation between trans-Tasman regulators was an important element of maintaining financial stability.
“The Australian and New Zealand financial systems are highly interlinked, with New Zealand’s four largest banks all subsidiaries of Australia’s major banks. That interconnection means a banking crisis in one country could well cause serious impacts on the other side of the Tasman.
“While both APRA and RBNZ run their own independent stress testing programs, conducting this single, coordinated exercise enabled both regulators to better assess cross-border risks, recovery actions and parent-subsidiary interlinkages under a common scenario.”
RBNZ Assistant Governor Financial Stability Angus McGregor said the regulators will consider holding Trans-Tasman stress tests more regularly.
“Running this joint exercise has strengthened collaboration between APRA and RBNZ and contributed to ongoing improvements in stress testing capability, governance and scenario analysis across both jurisdictions.
“Feedback from participating banks indicated that the joint approach reduced regulatory burden and supported stronger engagement between Australian parent banks and their New Zealand subsidiaries. It also enhanced their ability to consider cross-border responses during periods of stress.”
APRA and RBNZ will use insights from the banks’ results to inform future supervision, risk assessments, crisis management and stress testing.
The RBNZ has published detailed findings for New Zealand banks on its website today. APRA will publish its detailed findings later this year, after engaging with participating banks. This is consistent with each regulator’s established approach to stress testing exercises.
