The proposed global bank reforms are designed to prevent another financial crisis. However, increasing the liquidity of the banks draws in dangers for depositors.

According to Access Economics consultant Ian Harper, “There's an extra cost in carrying more liquidity, and more cost again in the additional equity required for the risk-weight.”

Under the proposed reforms called Basel III, depositors now have weigh the quality of bank management and the quality of management of the government. Heavy consideration has to be given when governments issue an enormous amount of debt with a zero risk-weight for banks.

Former Commonwealth Bank chief executive David Murray explained, “When there's no cost involved, banks will keep holding sovereign bonds, but if a government defaults the depositor will bear the risk.”

Increasing bank liquidity or the bank's holdings of liquid assets (cash or assets ready for conversion into cash) under Basel III would force banks to increase their capability to meet obligations from the current five days to over a 30-day period.

Australia has a relatively low level of sovereign debt and an absence of high-quality corporate bonds which could both form a significant part of bank liquidity. Harper, who is also a member of the Wallis committee, said, “"But it may well be that our banks have to look at foreign sovereign bonds, which could increase the level of risk, given the indebtedness of some countries.”