The Australian Prudential Regulation Authority (APRA) has published the findings of its inaugural System Risk Stress Test, which focused on links between the banking and superannuation systems.

The exercise was conducted in 2025 with the four major banks and six large superannuation funds, and examined how a hypothetical “severe but plausible” shock might impact the financial system.

Although APRA has long operated an extensive industry-based stress testing program, this was the first time APRA has run a stress test examining how connections between different sectors could amplify or dampen risks.

For the inaugural System Risk Stress Test, APRA asked participating institutions to model a scenario involving liquidity pressures exceeding any experienced by large Australian banks over the past 50 years. The stress applied to superannuation funds was similarly severe, with member withdrawals and switching significantly surpassing levels observed during COVID-19. Adding additional complexity, the scenario incorporated an operational disruption at a material service provider.

The findings highlighted the resilience of Australia’s financial system to liquidity and market shocks, with all participating institutions able to withstand the shock and rebuild liquidity over the test period.

They also demonstrated the constructive role the superannuation sector can play as a stabilising force for the banking sector.

Other key findings included:

• The test highlighted system vulnerabilities that could amplify stress events, such as concentration risks, mismatched behavioural assumptions and common dependencies on major service providers.
• The response of superannuation funds to stress events can materially affect their members, banks and financial markets. For example, when an individual bank is under liquidity pressure, superannuation funds’ withdrawal of funding can amplify the liquidity stress. However, in a broader downturn and solvency stress, superannuation funds’ willingness to provide equity capital to banks illustrates their ability to dampen risk and support financial stability. 
• Some vulnerabilities in the system are likely to increase as the superannuation system grows and matures. Decisions by a small number of large funds could have outsized and more consequential effects across the system. As more members move into retirement, this will increase demands on liquidity and funds’ response capabilities to meet pension payments and member withdrawals.
• Better entity preparedness for stress events across industries will make the financial system stronger. The test found superannuation funds need to uplift their capabilities to test severe stress commensurate with the sector’s greater systemic footprint. It also highlighted areas where banks – which have more experience with liquidity stress testing – can uplift their capabilities.

APRA Chair John Lonsdale said the System Risk Stress Test had produced valuable insights that would inform APRA’s policy and supervision priorities.

“As our financial system becomes more interconnected, decisions made in one part of the system not only impact other financial institutions in the same sector, but those in different sectors as well as service providers.

“With superannuation expected to keep growing its share of the financial system in coming years, it’s essential we gain deeper insights into how super funds are likely to respond to a severe stress event – and how their decisions may impact other parts of the financial system.

“The findings of the stress test demonstrate the ability of our banks and superannuation funds to respond to financial stress and operational disruption. However, they also highlight areas where banks and super funds will need to invest more effort to further build up their resilience.

“APRA will use the findings to inform proposed amendments to bank liquidity requirements that we will consult on within the next 12 months, as well as core supervisory activities for banks and super funds. Additionally, they reinforce the importance of the work we are doing on material service provider arrangements in relation to operational risk management,” Mr Lonsdale said.

The full findings of the System Risk Stress Test are available on the APRA website at: System Risk Stress Test