The Financial System Inquiry announced on Friday that its interim report would be released on July 15 and that its chairman, David Murray, would address the National Press Club that day. Of all the issues raised by banks in their submissions to the FSI, the one they will be most anxious to see a response to is their argument that there is an imbalance in the current regulatory framework, with too much weight given to stability and not enough to growth and innovation. According to the Australian Bankers Association: "While a strong regulatory framework bring benefits, regulation of the Australian banking system also comes at a cost. "These costs are both direct, such as compliance and reporting costs, and indirect, such as the opportunity cost to the economy from impeding new entrants. Now is the right time to consider the balance being struck between stability, growth and innovation, for the prosperity of the wider economy and the benefit of customers. "Not every measure designed to improve stability should be implemented." The idea that there is an over-emphasis on stability in the current approach to regulation and that this will impede both industry competition and economic growth appears in almost every bank's submission. Commonwealth Bank put it this way: "While there has typically been constructive intent behind regulatory design since the Wallis Inquiry the development and implementation have not always adequately balanced the trade-off between preventing market failure and supporting the growth of the economy." Or, as Monash University's Rodney Maddock put it: "Most decisions taken by the Australian Prudential Regulation Authority for prudential reasons have a wide range of other consequences. It is not clear that APRA does, or is able to, make appropriate trade-offs." And this from PwC: "Australia needs to take extreme care lest we end up fighting the 'last war', focusing too much on excessive leverage and mismatch risk, and not enough on encouraging new sources of economic activity and growth." Yet, none of those submissions advanced any evidence in support of this argument. For evidence we need to turn to APRA's submission, which argued that "in principle, strong and effective prudential oversight is not at odds with efficiency and sustainable competition." APRA points to the strong growth of the sector since the Wallis Inquiry, relative to the overall economy, as evidence of the industry's ability to flourish under strong regulation. In 1997 the ratio of financial institution assets to GDP was 200 per cent and by 2013 this ratio had increased to 350 per cent. APRA also pointed to the fact that the Australian financial services industry continues to attract new participants. Between 2003 and 2013 APRA granted 72 new licences, many to foreign financial institutions. Incoming APRA chairman Wayne Byres reiterated these comments in an interview in the Australian Financial Review today. Byres, who has just finished his term as secretary general of the Basel Committee on Banking Supervision, said: "Obviously we