The "joint adoption of business models that are relatively low risk" by Australia's major banks may be a good thing for the industry, as may their concentration toward home loan funding, the Reserve Bank of Australia argued in its submission to the Financial System Inquiry.In Australia and New Zealand, the major banks focus heavily on traditional commercial banking - that is, servicing household and business customers. "The major banks have been able to earn good returns from this business, giving them less incentive to pursue potentially high-yielding, but higher risk, assets offshore," the RBA said. "They had little exposure to the complex structured credit products that were the catalyst of the global financial crisis; they are also not significantly involved in the types of investment banking activities that faced difficult market conditions and significant structural change of late.""Within their loan portfolios, housing loans - which typically pose less risk than most other forms of lending - account for over half of total loans."The RBA also addressed the debate over  "perceptions that systemically important banks are "too big to fail'.""If creditors assume that the public sector will not allow such banks to fail … this can result in competitive distortions, allowing these entities to grow larger and become even more systemically important. "It may also encourage moral hazard as banks that are perceived to be too big to fail may take on excessive risk with the assumption that the public sector will step in to cover the costs of downside risks, whereas the bank itself is the sole beneficiary on the upside."It said "these dynamics can lead to large costs for the public sector in the event of failure.""It is very difficult to quantify the extent to which the 'too big to fail' issue exacerbates systemic risk in Australia or other countries more generally, and thus to calibrate policies to account for apparent lower costs of funding or more risky behaviour."