The Federal Government’s response to the mortgage crisis has been to push for an even tougher regime on banks that will put them in the same position as the mortgage borrowers of old.
That has created the potential for a serious problem for banks that are trying to return to profitability.
When you put all those elements together, you end up with a situation where a number of Australian banks have to find their own way around the law, as opposed to trying to compete with their own peers who have to be bailed out in a regulated way.
The big banks are still struggling, despite a huge rescue by the Reserve Bank of $US5.5 billion ($6.2 billion) last week.
The latest figures show they are still operating below their levels before the financial crisis.
But the bigger banks have been making significant progress.
The Australian Competition and Consumer Commission (ACCC) says that over the last 12 months, the total number of outstanding complaints against Australian banks has fallen from 2,000 in March 2016 to around 5,000 today.
Its a remarkable turnaround from the early months of the financial collapse, when more than 100,000 complaints were filed against major Australian banks.
That number dropped to under 20,000 by the end of June, when the Reserve Board announced it would impose stricter conditions on the banks that would see them forced to pay a penalty of between 1.5 and 4 per cent of their net assets.
While the new regime may not be as harsh as the old one, its still not good enough for the big banks.
They want to be able to pay back their shareholders before they go bust.
That’s what the Reserve has been telling them to do.
In a statement to Fairfax Media, the regulator said it was not a mandate to put in place any new regulations.
But the banks have decided to take action anyway.
The new rules will see them pay an additional $5.8 billion in penalties to shareholders in order to recover more of their losses.
It is a massive penalty for a number on the smaller banks that were already struggling to make ends meet before the crisis.
And its going to put some pressure on the big Australian banks to come clean.
They are now expected to provide more detailed information about the size of their deposits in order for regulators to know how much money they are making.
So that’s the risk the regulator is taking in the future.