CARE to start up a bank? Just pop down to the Australian Prudential Regulatory Authority and fill out a few forms. It’s the authority, not the government, which licences banks in Australia.

You will soon find this exercise a highly theoretical one. The authority, although the nation’s prudential regulator, is actually funded by the big banks. It is a bit like having the automotive division at the consumer affairs watchdog funded by the leading used-car dealers. Or the Australian Competition and Consumer Commission funded by Amcor and Visy.

“Would you care for some more competition in the cardboard box market, Mr Pratt? A new entrant, perhaps? Or shall we raise the minimum capital requirements?”

To start a bank you will need $50 million in Tier 1 capital, cash that is. Even then this won’t be enough. One enterprising type who has sought to jump through the authority’s hoops finally came up with his $50 million only to be told he didn’t meet a slather of other requirements, such as a branch network.

Banking, at its core, is simply a risk-management proposition. It is about borrowing short-term money and lending it out for the longer term. The risk lies in the leverage, not the size. If capital adequacy rules require you to hold 5 per cent in capital against your loan book, then you hold $5 for every $100 lent. You go to the money markets for the other $95. When you fund your regulator, have the imprimatur of a government guarantee, and you can’t go bust, this is one rolled-gold business.

Still, they cried poor this week: intense competition, rising costs – the usual mantra. The cry was intense competition and high funding costs this time last year, before the big four’s profits ballooned to $24 billion. Same deal. Critics debunked as bank bashers.

At what point do they become so big as to damage the economy? Banks don’t create wealth, they clip the ticket of those who do. Big banks and big miners already dwarf other sectors in the stockmarket and, at some stage, if we have not reached it already, the banks’ drive for profit will begin to cost other, more productive sectors too dearly.

The Treasurer, Wayne Swan, kicked off this week with his “reform” package, a package designed for consumers, which promptly, and paradoxically, jacked up the market value of the big four by $3.4 billion. That was Monday.

The bank debate then raged all week at the Senate inquiry, and from podiums in hotel ballrooms as chairman of three of the big four addressed their shareholders at annual meetings. And yesterday … drumroll … the finale: yet another leg-up from taxpayers.

On top of the Commonwealth’s deposit guarantee, and the former funding guarantee. On top of the special protection against short-sellers and the assorted liquidity measures from the Reserve Bank during the financial crisis (RBA facilities to swap risky assets which you can’t sell for nice, liquid taxpayer assets), the central bank is now to establish yet another lending facility.

To comply with the latest international liquidity rules under the Basel III Accord, bankers in most other countries have to set aside more capital in liquid securities, independently. Not so our mob.

The Reserve Bank is to create a liquidity fund from which our banks can borrow if they get into trouble. Now we taxpayers have gone deeper into the lending business. While the big bankers are paid $10 million to $16 million in salaries – even the human resources honcho at the CBA makes a cool $4 million – we, the hoi polloi, merely get the chance to defray their risk.

Now, explicitly, we socialise the losses while they capitalise the profits.

As if the Treasurer’s “reforms” and the new Basel III measures were not enough, the Assistant Treasurer, Bill Shorten, sallied forth with his superannuation package on Thursday, one which entrenches the super gravy train. As well as 90 per cent of the mortgage market, the big banks control half the superannuation market via their wealth management divisions.

Roughly, the average super fund has returned 3 per cent a year over the past decade. Billions are raked off in fees. Industry funds on average perform better than retail funds and this performance gap can be put down to costs – fees, that is.

And we should be mindful that asset-based fees, just like interest on an investment, compound over time. Michael Lannon, the managing director of the managed funds discount broker 2020 Directinvest, calls this the ”reverse miracle of compound fees”.

Take typical total fees of 2 per cent a year for a small investor and assume an investment return of 7 per cent a year. Lannon

says that over five years, 7.3 per cent of the investment return will be paid in fees; over 10 years it will be 17.2 per cent and over 20 years, 31.5 per cent.

That is one mighty whack.

As expected, the Cooper review’s excellent no-frills MySuper initiative was endorsed. This should help eliminate the pillaging of default-option super by overcharging funds.

Unfortunately, Shorten declined to adopt Cooper’s key recommendations on fund transparency and governance. All up, we can take solace – not in the performance or future prospects of our super, but in the fact that at least the system provides a large pool of capital for deployment in productive enterprise.

The flipside is that, as the banks now comprise such a large part of the stockmarket index – and as the banks dominate in financial products – our superannuation system is beginning to resemble four big banks buying shares in one another … and themselves. And that is unproductive enterprise.

Merry Christmas to all!