The COVID-19 pandemic is putting a major strain on the global financial system but reforms put in place after the 2008 global financial crisis are helping banks weather the storm, the Reserve Bank of Australia says.
Banks have more capital, less liquidity and less complex business structures than before the GFC, it says.
"Even so, the COVID-19 pandemic is putting the spotlight on a number of pre-existing global financial vulnerabilities," the RBA said on Thursday in its Financial Stability Review.
Those vulnerabilities include areas of high leverage in some non-bank financial institutions, weak banking systems and high soverign debt in Europe, high debt in some corporate and household sectors, and investment vehicles "that offer a high level of liquidity despite their underlying assets being illiquid".
In Australia, high household debt and elevated housing prices are elevated risks for the financial system but the country's businesses generally have low levels of gearing and significant liquid assets that will help them survive.
Also, the downturn in housing prices last year reduced the risk that a further fall in house prices would result in widespread negative equity and larger losses for lenders.
"Most households now have substantial equity in their homes," the RBA said.
"The economic downturn, uncertainty and social distancing are likely to result in very little turnover in the housing market.
"It remains unclear how this will affect residential property prices."
The RBA overall sounded a note of confidence, saying Australia's financial system is well positioned to "absorb, rather than amplify, the effects of the pandemic".