Society must "take practical steps to reduce moral hazard" connected to the financial sector, David Murray, head of the Financial System Inquiry, told an industry audience yesterday.In a speech surveying the key issues in the inquiry's final report, which was released on Sunday, Murray emphasised the macro themes underpinning the report."We believe external shocks can and will occur. As a result of the crisis, governments are now assumed to be the backstop the financial system," he said."In contrast to Wallis, we cannot simply rule out the possibility that the Government will be required to backstop the banks in the event of a crisis. "However we believe the system should be managed such that taxpayers are highly unlikely to lose money."Murray also pitched for a reframing of responsibility for financial product flow that shifts away from the Wallis era mantra centred on disclosure."We believe that effective disclosure and financial literacy are necessary but incomplete approaches for delivering satisfactory consumer outcomes," he said."For this reason, we have highlighted the need for improved firm culture along with stronger obligations in some areas, especially in product manufacture and distribution."In relation to capital, Murray reiterated that "the inquiry believes the capital ratios of Australian banks should be 'unquestionably strong'. Specifically, they should be ranked in the top 25 per cent of global banks.""Also in relation to capital, we recommend the Government should proceed to introduce a leverage ratio as a backstop to ADI's risk weighted capital positions - in line with the unfinished Basel III agenda."Proposals for the issuance of 'bail-in' debt securities should, however, not move ahead of developing international standards," he said. "If issued, this form of debt should conform to the principles relating to legal certainty outlined in our report. We do not propose that depositors should be bailed-in."Murray said the recommended narrowing of the gap between big banks' IRB risk-weight models and the standardised model risk weights for housing loans would correspond "with a small funding cost increase for the major banks." "However, competition will limit the extent to which these costs are passed on to consumers," he said.