APRA chair John Laker answered questions after he delivered his formal paper.

Here’s a selection:

• Will the government guarantee on deposits create "moral hazard" (ie tempt financial institutions to take risks)? A: his definition of "moral hazard is "do not create incentives which will later undermine your objectives". The test will be in 3 years when the government reviews the coverage of the deposit guarantee. The guarantee is a guarantee of liabilities of ADI’s not a guarantee against their failure. But at this point in time the priority is the need for global confidence.
• Do the recent changes mean the end of a mega-regulator? A: The merger of ASIC and APRA is not on the current policy agenda. The status quo is working well.
• Will the government guarantee mean an expansion of APRA? A: APRA needs to be well resourced. APRA will seek to hold its staff levels at 560-570.
• How should ADI’s deal with unsubstantiated media rumours about their stability? A: APRA can give behind the scenes reassurance but it is up to ADI’s to deal with rumours direct with the media or even by litigation if the rumours generate a "run".