Submission to the Inquiry into the Australian Banking Industry A. Introduction

1. The Reserve Bank's relationship with the Australian banking industry is necessarily very close, given its direct responsibility for the prudential supervision of Australian banks and the protection of their depositors and, more generally, for the integrity of the payments system and overall stability of the financial system.
2. This submission focusses on three main areas:
   1. the evolution of the banking and financial system, with particular reference to the changing environment occasioned by deregulation;
   2. the nature and extent of competition in the banking sector; and
   3. the trade-off between ensuring effective competition and wide choice on the one hand, and maintaining prudential requirements appropriate for a stable financial system on the other.

The Bank would be happy to elaborate on any aspects of this submission, and to respond to any supplementary questions the Committee might wish to ask it.