Wayne Swan’s long-promised wave of banking reform finally reached shore yesterday in the form of a gentle break that won’t exactly fret the banking cartel.

No one expected a dumper that would seriously upset the anti-competitive dynamic of the banking oligopoly. But as a reform package, it’s not a bad set of initiatives at all. If it had been announced six months ago, minus the context of recent gouging by the cartel and Joe Hockey’s effective campaign to focus the political spotlight on banking regulation, it would, or at least should, have been applauded. It would be easy to criticise the package as another example of how this government talks big on reform but under-delivers, but it continues the government’s long-term agenda of empowering consumers and propping up the RMBS market. With a bit of a stretch, you can also see in Labor’s reform proposals on financial services, increasing compulsory super and, now, permitting covered bonds, a long-term plan to increase, and more effectively tap into, our national savings pool.

But now, it looks inadequate, politically and in terms of its substance. This is a clutch of long-term, evolutionary reforms aimed at removing some the impediments to a more efficient finance sector dressed up with rhetoric and some paraphernalia and sold as the answer to tabloid problems such as annoying bank fees and residential mortgage rate hikes.

There’s also a partial conflict between the goals of increasing competition and lowering the cost of borrowing. Covered bonds have been long sought by the big banks, and should help reduce their dependence on foreign-sourced short-term debt, and reduce borrowing costs. Smaller banks, with fewer assets to try to securitise this way, are comparatively disadvantaged, although not to the extent that the government’s wholesale funding guarantee directly discriminated against smaller institutions courtesy of its ratings-based pricing system. That distortion remains in place.

Don’t expect the fifth pillar — however rebadged and promoted — to sprout any time soon.

The focus on consumers enables patronising commentators to continue to insist that this is all about populist bank-bashing, in complete defiance of the fact that not merely has Joe Hockey repeatedly talked about the issue of systemic risk and post-GFC regulation, but that several economists have been calling for the “too big to fail” problem demonstrated by the GFC to be addressed for more than a year. This issue — of much greater significance than residential mortgage rates, which will always be about where the RBA wants them to be — remains entirely unaddressed in Swan’s package. The government has merely added to the slate of piecemeal inquiries into various aspects of the financial regulatory system without accepting the need, nearly a decade-and-a-half after Wallis, of another systemic inquiry.

Moreover, the government has proposed making its deposit guarantee permanent (albeit, perhaps, at a lower threshold than $1 million). As several commentators have noted, how the scheme will be paid for remains unclear — at the moment it remains free insurance for deposit taking institutions. This actually embeds the contradictions exposed by the GFC into our post-Wallis regulatory system, without any sort of analysis or debate.

One small step in the right direction is that among the issues Bernie Fraser has been tasked with considering is the establishment of a central registry for loan information. At the moment there is a gaping hole in our understanding of what is happening in real time in lending markets — the only real market data we have is retrospective, based on information gathered by regulators and the ABS reflecting what was happening with lending weeks or months before.

Christopher Joye has written about this information blind-spot and its dangers in a far more volatile informational environment facing financial regulators and consumers. He proposed a central credit register to address it — exactly what Fraser will be considering.

The biggest risk from this package is that this is it for banking regulation reform for the next few years, that the only further action we see on the issue is Opposition and minor party fiddling with the legislation implementing aspects such as  the ban on exit fees. That would leave the systemic problems around moral hazard and “too big to fail” embedded in the system, waiting to be exposed by the next financial crisis. And there will be another financial crisis.