While the financial crisis cut swathes through the financial sector and real economics of developed countries generally its effect in Australia was to illustrate a grand paradox.

Our banks were revealed to be amongst the strongest in the world, profitable beyond the wildest dreams of the pre-deregulation era. At the same time they were dangerously fragile, requiring unprecedented guarantees not just on deposits but also for wholesale creditors. If the analysis offered in this paper is sound the policies it proposes will make our financial system not just less fragile, but also substantially more competitive.