More than other big businesses, banks are interwoven into the fabric of the economy. With $2.2 trillion in assets, mainly loans, the big four's assets are worth half as much again as Australia's gross domestic product (GDP). Any business of this size, but especially a financial business, poses unique risks to an economy. While scale can bring advantages from increased efficiency or cheaper funding, it also means authorities have no choice but to bail them out if they get into trouble. They are ''too big to fail''. Perversely, this implicit guarantee can encourage managers to take more risk than they might otherwise, which only makes financial distress more likely. Five years after the global financial crisis, policymakers are yet to resolve this thorny issue. Global rules on ''too big to fail'' will be a key item on the agenda for the G20 meetings of world leaders in Australia later this year.

So, how are we handling it so far? In late December, the Australian Prudential Regulation Authority finalised rules on domestic systemically important banks - forcing the big four to set aside billions more to make them better able to absorb losses. This is being done in most countries and is undoubtedly sensible. But a lively international debate continues about whether these types of measures go far enough. And the discussion is being led not by bank-bashers, but by insiders. A former International Monetary Fund chief economist, Simon Johnson, argues the global ''too big to fail'' problem is now more acute than it was before the collapse of Lehman Brothers in 2008. Why? Because after the turmoil caused by Lehman's failure, distressed banks received equity injections from taxpayers during the GFC, rather than being wound up. No bank received an equity injection in Australia, but the sector did have access to a taxpayer guarantee on new borrowings.

As a result, investors assume the big banks will again receive help if they get into trouble. Standard & Poor's explicitly factors this into its AA minus credit ratings for the big four. Governments here and overseas are trying to change this perception, by forcing banks to write ''living wills'' that would allow for the ''orderly'' failure of a bank, in which shareholders would wear some pain. But in Australia, so far, these have not been enough to change S&P's view. It assumes the government would be ''highly supportive'' of a lender in distress, and this raises its credit ratings for the big four by at least a notch. The effects of this ''too big to fail'' status need to be explored, and the Murray inquiry looks like the ideal opportunity. After all, the growth in Australian finance stands out internationally. A 2012 paper by academics Patrick Bramer and Hirst Gischer said the total balance sheet of the big four as a share of GDP rose from 93 per cent in 1995 to 193 per cent in 2010. The only other country to experience a bigger surge was Great Britain.

The Bank for International Settlements has also highlighted the risks of having a super-sized financial sector, if they weren't already obvious. In 2012 it published research suggesting financial sectors of more than 6.5 per cent of an economy's value added became a drag on activity. Australia's financial sector is above this level, at about 8 per cent. Even bankers, and not just those from smaller lenders with a vested interest, say Murray should be looking at the size of the big four. In an interview with BusinessDay in December, former Westpac chief executive Bob Joss said the balance sheets of Australian banks might have to play a smaller role financing lending. Instead, he said, investors could fund more lending directly, such as by buying corporate bonds. ''The bigger the balance sheet gets, the more important the issue of government backing becomes,'' Joss said. ''Australia is now sophisticated and advanced and prosperous enough, you would expect perhaps to see more flowing through markets and the banks could all assist that with their capital markets groups instead of putting it on their balance sheet.'' The big banks are already lobbying against any rise in regulation from the inquiry, arguing they have proven resilient in recent years.