The collapse of Silicon Valley Bank has sparked concerns around the stability of the banking system, leading the Australian Prudential Regulation Authority (APRA) to increase its supervision of the sector.
As part of this increased scrutiny, the APRA has reportedly instructed local banks to provide daily updates on their exposures to crypto assets and associated risks. The agency hopes to gain greater insight into the banking sector’s exposure to cryptocurrencies as they become an increasingly popular investment option. The move follows similar steps taken by regulators in other countries, including the US, where regulators have also increased their focus on crypto assets.
The Australian Banking Association (ABA) launched an inquiry to evaluate how the COVID-19 pandemic and geopolitical tensions are impacting Australia-based citizens. Jonathan Mott, a Barrenjoey analyst, warned that confidence could quickly be disrupted, putting pressure on bank margins. Research suggests that more than 186 US banks are at risk of collapse due to rising inflation.
As cryptocurrencies gain popularity, regulators must monitor banks’ exposure to the asset class. The APRA’s request for daily updates on exposure to crypto assets and associated risks aims to understand the impact of cryptocurrency on the banking system and protect consumers. This will help maintain financial stability.
