But the financial system can become exposed to many other types of risks over time, in response to structural changes in regulation, technology, market structure or the physical environment. Some examples include conduct, cyber, climate change and FinTech. As we have seen in the UK and the US in the wake of the GFC, conduct and operational risk can have significant prudential impacts.
In New Zealand our 2017 stress test scenario demonstrated the potentially significant impact that a failure to comply with responsible lending obligations could have for local banks. The reputational and financial impacts of misconduct are now playing out in Australia in the wake of the Australian Royal Commission into misconduct in the banking, superannuation and financial services industry.