When it comes to reports to government, there is a deep schism between recommendations and implementations. Still, the Financial System Inquiry report handed down yesterday is certain to rattle Australia's most powerful institutions, the Big Four banks.

Already the backlash will have begun. Bank lobbyists are no doubt whiteboarding up a storm, plotting how to undermine the more-substantial proposals from the Murray report that entail the big banks lifting their levels of capital as a buffer for times of crisis.

More will become clear in coming days as analysts model the recommendations on extra capital and risk weightings. Suffice it to say that, on very rough numbers, the big four may be up for $20 billion in rising capital ratios – the recommendation is an increase from 8.3 per cent presently to between 10 per cent and 11.6 per cent. The effect of risk-weighting recommendations is equally pronounced.

The big winners in all this are the smaller banks. Shares in Suncorp, Bendigo and Adelaide and Bank of Queensland are likely to rise tomorrow while ANZ, Commonwealth, National Australia and Westpac either get hammered or stay flat. The inquiry has sought to strip away the competitive advantage of the Big Four and create a bigger bank club; more members, a more level playing field, more competition.

Ultimately, and as anticipated, the taxpayer still underpins the banks. David Murray sought to play down the Too Big To Fail subject of sovereign support for the banks.

In strengthening the system, he told a media conference, "the implicitness of the implicit guarantee tends to go away" – bankers, politicians and bureaucrats have a penchant for mincing their words when it comes to corporate welfare.

Overall then, "moral hazard" still looms large. For bankers, the penalties for risk are slight and the rewards sizeable. Governments will always prefer the stability of the system over competition. Australia's comparative stability through the global financial crisis has reinforced this principle. In Murray, then, shareholders still win over taxpayers – albeit with shareholders taking a few hits – but the oligopoly of the Big Four is now under challenge.

Vertical integration – the immense concentration of power in the banking and superannuation markets by the Big Four – remains, albeit with fillips to the smaller players.

There are some sensible recommendations by the FSI, including containing those on super fund leverage, revisiting the issue of tax breaks on super and redrawing and streamlining the laws and the regulatory landscape.

"Risk weights have fallen noticeably," said Murray. "Housing is an issue." Housing assets used to make up 50 per cent of bank assets. That ratio now stands at 65 per cent.

The Murray recommendations are designed for the long term and, although there has definitely been no scaremongering in the release of the FSI report, a falling property market is, front and centre, the primary economic disaster scenario for Australia.

Such is the concentration of bank assets in housing, such is the sheer size of our overseas borrowing component to fund the housing market, and such have the prices run up – with only a blip during the GFC – that a correction is not a matter of "if" but of "when". No market, even Aussie house prices, rises for ever.

For now, however, submissions to the inquiry are still open, the discussion is in full swing and vested interests from the private sector will be visiting decision-makers from the public sector in droves in order to stymie some of Murray's more-weighty reform proposals.

His report, for now, remains a 340-page stack of paper. While it is true that its predecessor, the 1997 Wallis Inquiry, was largely implemented and set the policy paradigm that saw the nation fare well through the GFC, things have changed.

Governments of both hues are proving increasingly weak in the face of lobby groups – even pathologically incapable of standing up for public interest in the face of powerful vested interests. And Australia's banking lobby is the richest and most powerful of them all.

If you were betting on an outcome therefore, you would bet the Murray recommendations, even if implemented widely, will still be watered down.

The Henry tax review is a classic case in point; economically credible, sensible and timely – yet largely ignored.

Credibly, Murray has paid significant attention to the scourge of excessive fees in the superannuation system. Whether the government ever acts decisively on this – its track record is not good – is entirely another matter. There are a lot of people riding the superannuation gravy train, and plenty of them in the ear of Treasurer Joe Hockey.