Opposition Treasury spokesman Joe Hockey escalated his confrontation with the banking industry yesterday, by asking whether banks should be re-shaped into lower-risk, lower-growth businesses.In a speech to the Australian Industry Group, in Canberra, Hockey also set out nine "policy suggestions" for strengthening the banking industry, and called for a debate on whether Australia has adequate banking competition.In contrast to last week's widely criticised media comments from the shadow treasurer, yesterday's precisely structured speech reflected consultation with industry experts. In particular, it adopted many ideas previously advocated by Christopher Joye, influential commentator and head of financial advisory group Rismark International.Hockey made it known yesterday that the shadow cabinet had signed off on his proposals, underlining the fact he is repositioning the Liberal Party on banking issues.His latest remarks put further pressure on the Labor government and its Treasurer, Wayne Swan, to take their own initiatives to improve bank competition and safety. It also increases pressure on the CEOs of the NAB, ANZ and Westpac to provide politically savvy responses as they announce hefty full-year profits over the next nine days.The Australian Bankers Association is treating Hockey's statements as a serious challenge. Its chief executive, Steven Münchenberg, said the speech "leaves the door open to re-regulation and high levels of political interference from government in commercial decision-making." The industry is desperate to avoid being forced into what is sometimes called the "narrow banking" model, regulated like a gas or water company and forced into accepting a low rate of return in exchange for a quasi-monopolistic position. Hockey's remarks push the debate in this direction.Hockey described "a growing conflict" between "the high-growth aspirations of bank management teams and shareholders" and "the longer term interests of taxpayers and regulators" who want lower risk."Since the major banks have become the system following the financial crisis, it is hard to understand how they can expect to perpetually grow at a rate higher than that system," he said.Hockey also suggested finding ways to quarantine high-risk bank activities. "So, for example, we might allow banks to expand offshore and engage in riskier business profiles, but ensure that it is impossible for their offshore activities to in any way, directly or indirectly, undermine their Australian operations."Hockey again described his ultimate aim as a "social compact" between banks and government.