There is a major disconnect in the Australian financial system that the regulators are doing little to correct. Much of the nation's savings are in the superannuation system (currently A$1.5 trillion and heading for $6 trillion by 2030), while much of the nation's funding need is in the banking system. The total loans of the four major banks, of $1.8 trillion, are greater than their deposits. An obvious solution is to make it as easy as possible for publicly offered super funds to invest in bank deposits, but some recent regulations operate in the opposite direction. Furthermore, they create more incentives for investors to set up self-managed funds at the expense of large, publicly offered super funds. Consider the aggregated balance sheets of our four major banks (see table). The ratio of deposits to total assets of the major banks is only 58.1 per cent, and the amount of their loans is 114 per cent of their deposits.The funding shortfall comes primarily from two sources: wholesale short-term money markets ($205 billion) and longer term bond markets, mainly offshore ($465 billion). It is in the interests of banks' stability that they finance themselves more from stable, long-term retail sources, such as deposits from the superannuation system (including retail platforms and wrap platforms), and the regulations should be designed to encourage this.In an earlier article in Banking Day, in February, we demonstrated how the government deposit guarantee does not apply to investors using publicly offered super funds to deposit funds in banks. In addition, the proposed Australian Prudential Regulation Authority's Prudential Standard on Bank Liquidity (APS 210) is designed so that deposits from large, publicly offered super funds will be considered volatile wholesale money against which banks will be required to hold expensive liquid assets. This will make the banks less willing to pay competitive interest rates on deposits from these major super funds. However, SMSFs have been granted a special exemption, which categorises them as stable retail deposits, giving them another regulatory free kick.The lack of significant superannuation industry lobbying against the terms of the government guarantee and the liquidity rules is mysterious because they make little practical sense, either from a bank, superannuation or good liquidity management perspective. The days are long gone when the super industry could ignore what is happening with bank regulation.Most of the major retail fund managers did not offer bank term deposits or bank cash accounts on their platforms until 2008 or later, and many industry funds still do not give their customers a range of term deposits from which to select. Customers who want cash or term deposit exposure must choose managed funds such as cash trusts that invest in these instruments. Even before APS 210 hits, there are two problems for publicly offered super fund investors that SMSFs can avoid.The first is that the administrator of the publicly offered super fund takes a management fee, while the second is that investors are unable to take advantage of special 'blackboard' deals offered by banks