Four pillars endorsed by Murray

The longstanding "four pillars" policy may be writ more brightly in the policy firmament in the wake of the final report of the Financial System Inquiry.

"As the banking sector is at the core of the Australian financial system, its stability is of paramount importance," David Murray's panel said.

"The sector is responsible for the majority of intermediation between savers and investors, and is highly interconnected with the rest of the financial system.

"In addition, the banking sector is concentrated, with the four major banks being the largest players in virtually all respects.

"This concentration, combined with the predominance of similar business models focused on housing lending, exacerbates the risk that a problem at one institution could cause issues for the sector and financial system as a whole," the panel said.

It insisted that, "to prevent  further concentration, the longstanding 'four pillars' policy , which precludes mergers between the four major banks," must continue.