Supplementary Submission to the Financial System Inquiry Introduction

This supplementary submission gives the RBA the opportunity to expand on three topics raised in the Inquiry's Discussion Paper which were covered only briefly in our original submission.

The first Chapter attempts to set out the broad parameters of how we see the financial system developing in the next ten years. It concentrates on two questions – the relative importance of banking compared with other financial institutions, and the degree of risk in the financial system.

The second topic is the implications of technology, financial innovation and the entry of new competitors for activities which were previously the preserve of banks. Both the commercial and the prudential implications of these changes are discussed in Chapter 2.

The third topic is depositor protection. There has been some criticism of the present depositor protection provisions of the Banking Act, and Chapter 3 sets out some alternatives for overcoming these criticisms.