The speech offers some high-level remarks on the financial system, from both a domestic and global perspective. It begins by providing context on the environment in which the Financial System Inquiry (FSI) in Australia took place, noting that the regulatory architecture (put in place by the Wallis Inquiry) and the financial system more generally came through the financial crisis well.

In covering a number of themes raised in the FSI, it explores the case for and against requiring banks to hold more capital. It explains how the Inquiry has concluded that the move towards resilience outweighs the small associated costs. On how to end the issue of ‘too-big-to-fail’ institutions, it notes the international work towards more loss absorbency in the event of the failure of a systemic institution. The potential of ‘bail-in’ provisions is then explored, with discussion of the environment that would be required for this to work. Whilst it says that the Bank and Inquiry have advised caution on this matter, the speech acknowledges that there seems to be a wider move towards such an approach globally.

The FSI's recommendations related to the payments system and the Bank's review of card payments regulation and Issues Paper (released in March) are then considered. On surcharging, the speech notes that virtually all of the public's concern is related to a couple of industries where surcharges appear to be well in excess of acceptance costs. The Bank's reforms of 2002 and 2013 are explained in more detail before the speech looks at other options that could be considered as part of the Bank's current review. On interchange fees, the speech explains that the Bank is currently considering whether the present caps remain appropriate, before exploring other elements of the regime that warrant consideration.

Moving away from the FSI, the speech looks at the impact of risks of the continued global ‘search for yield’. It discusses the effect of the current economic and financial environment (in a world where long-term nominal returns on low-risk assets are very low) on the retirement income system over the longer term. It acknowledges that those preparing for retirement are in a much less desirable position than previous generations and will have to accept a lot more risk to generate their desired flow of income.

The speech closes with a discussion of misconduct within the financial industry and the role that distorted incentives and erosion in the culture of integrity may have played in such behaviour. It notes that work is underway to clarify expected standards of behaviour but acknowledges that culture has to be nurtured, developed and exemplified in behaviour.

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