The Financial System Inquiry would explore the extent to which stability objectives hinder competition, inquiry chair David Murray, said in a talk to the Committee for Economic Development of Australia in Sydney on Friday.
In his first public talk since taking up the assignment in November, Murray called for "as many submissions as possible to our inquiry, which aims to finish its work by the end of the year.
"In the wake of the financial crisis, it is not surprising that the focus of regulators and global standard setters has been on stability rather than competition," he said. "We will be very interested to examine the extent to which stability objectives might hinder competition, or even perhaps in some cases, promote more competition and reduce systemic risks.
 "Inevitably, the object of regulation for stability creates a cost to the economy and we would welcome views on the trade-off between these objectives."
 Murray said the committee would "examine the state of competition in banking, payments, insurance, funds management and financial markets and whether it drives or impedes efficiency in the financial system."
 "A key issue in this area will be the impact of regulation on competition, including whether firms face a 'level playing field'."
 Murray said while "regulation can promote competition, for example by helping consumers make more informed decisions, it can also create barriers to entry and increase compliance costs, with varying outcomes for financial institutions of different sizes."
 In keeping with the terms of reference, Murray said one theme would be "the funding of Australia's economy."
 "One view is that the economy will fund itself one way or another. Another view is that there may be circumstances where funding of the economy may be at risk with issues of contagion and loss of confidence potentially causing structural damage to the economy.
 "Irrespective of which view you take, what matters is the quality of the funding of the economy."
 Murray stressed that his panel would be "be interested in the allocative efficiency of the financial system in funding the economy."
 "For example, we will be interested in how well the economy funds small and large businesses, households, Governments, agriculture, industry, infrastructure and new and developing ventures whether these be in urban or regional areas.
 "An issue will be whether there are distortions in the system that favours the funding of some users and/or providers of capital over others.
 Murray asked: "Is the system continuously adapting with new types of claims and obligations better suited to the issuers and holders of financial securities?"
 "For example, there has been discussion for some time on the development of Australia's bond markets, venture capital markets and mechanisms for funding infrastructure.
 "Also, there has been interesting innovations in the not-for-profit sector such as social bonds."