In 1996, the coalition government of John Howard commissioned the second Financial System Inquiry. Stan Wallis, CEO of cardboard box maker and ASX perennial, Amcor, led the inquiry. It produced an interim report late that year and a final report in 1997. The inquiry was commissioned to make recommendations on regulatory arrangements that would respond to the developments of the previous decade and ensure an efficient, responsive, competitive and flexible financial system. Specifically, the underlying objectives of the Wallis Inquiry were: to promote greater efficiency through enhanced competition, to maintain confidence and stability in the financial system while preserving the ability to be responsive to innovation and market developments. The inquiry found that the intensity of prudential regulation should be proportional to the degree of market failure which it addresses. It also made clear that it should not involve a government guarantee over any part of the financial system. This advice was impossible to follow during the 2008 crisis. Wallis emphasised the responsibility of the board and management of financial institutions to ensure that the financial promises made to consumers were kept. Prudential regulation and supervision should seek only to add an additional discipline by promoting sound risk-management practices by firms and providing for early detection and resolution of financial difficulties. The inquiry considered that, while prudential regulation was warranted in certain limited circumstances, its more intense forms would need to be wound back over time and the regulatory focus shifted towards the conduct of market participants and disclosure of information. The financial regulation framework recommended by the Wallis Committee in its final report of March 1997 was intended to be flexible in the face of ongoing change in the financial sector. This evolution in the market required a shift in regulatory philosophy towards an increased reliance on disclosure and market-based signals and away from highly specialised prudential or industry-specific regulation. The Australian Government accepted a majority of the recommendations of the Wallis Inquiry. The key recommendation was a new organisational framework for the regulation of the financial system. The inquiry recommended a model of regulation based on functional objectives, with three 'peaks': a single prudential regulator; a regulator for conduct and disclosure; and an institution responsible for systemic stability and payments. The regulatory framework prior to the Wallis Inquiry was based on a sectoral approach, where different regulatory institutions had responsibility for specific industries within the financial sector. The reforms built upon the previous regulatory framework that was based on four institutional regulators and replaced them with three agencies established on functional lines. Under the Wallis reforms, the Reserve Bank of Australia is responsible for monetary policy, the overall stability of the financial system and the regulation of the payments system. The RBA focuses on maintaining stability in the financial system (including the payments system, which is an important contributor to stability). The