The Role of the Reserve Bank

The RBA is responsible for contributing to the stability of the Australian financial system. This is a longstanding responsibility, formalised by the Government in the 2024 amendments to the Reserve Bank Act 1959 in response to the Review of the Reserve Bank of Australia.

How does the RBA contribute to financial stability?

The RBA contributes to financial stability in a number of ways.

Some of those are ‘preventative’ – focused on promoting resilience and mitigating vulnerabilities, so that the financial system can withstand a range of adverse conditions.

Others are ‘curative’ – designed to contain disruptions and restore confidence during periods of financial distress.

Together, the aim is to ensure the financial system will continue providing Australians with the financial services they need, both in good times and bad.

Supporting the economy through monetary policy

A fundamental way the RBA contributes to financial stability is through monetary policy. By setting monetary policy to achieve low and stable inflation and full employment, the RBA helps create the economic conditions that support a stable financial system.

Monitoring the health of the financial system

The RBA monitors financial stability risks and vulnerabilities on an ongoing basis and presents the Monetary Policy Board with a detailed assessment twice a year. This is published publicly in the RBA’s Financial Stability Review.

Keeping the payments system running smoothly

The RBA ensures the payments system and key financial market infrastructures are operating safely and efficiently, so the financial system can run smoothly. This includes an important operational role managing the Reserve Bank Information and Transfer System (RITS), which allows banks and other institutions to settle payment obligations in real time.

Partnering with other agencies

The RBA works closely with the Council of Financial Regulators (CFR) – which is chaired by the RBA Governor – to identify and monitor financial stability risks and vulnerabilities, and coordinate policies to address them. This includes providing advice to the CFR agencies on the financial stability outlook to support policy responses.

The RBA also engages with international bodies such as the Financial Stability Board and the Basel Committee on Banking Supervision to promote effective financial stability standards and cooperation across borders. This is essential given the interconnected nature of the Australian and global financial systems.

Stepping in when needed

The RBA plays a critical role in crisis management, working with the CFR to stay crisis ready and ensure effective responses to a range of potential or actual instances of financial instability. If needed, the RBA can use its balance sheet to provide liquidity support to eligible institutions, or intervene in certain financial markets to address dysfunction.