This is the second instalment from an exit interview with John McFarlane, managing director of ANZ who retires from the bank at the end of September after 10 years at the helm of the company.McFarlane gave the interview last Thursday, September 6.Ian Rogers: How deep was your knowledge of the Australian business and banking scene when approached for this job in 1997, and what were your early perceptions, and how did they change?John McFarlane: Well, I didn't know a lot about Australia, but I had some prejudices. I was sent here in 1990 by Citibank, to sort out Citibank here.Ian Rogers: The recession?John McFarlane: Just after, it wasn't the recession so much.Ian Rogers: Well, they had had a well above average share of losses, I remember that.John McFarlane: Correct, but it wasn't the sort of base business that did badly, it was over-exposure to leveraged property transactions, and over-exposure to very high leverageds at the top of the cycle, it was both those things, and what was interesting about Australia. I did some analysis, because I had a hypothesis … the reason why Australian financial institutions got into trouble, and why the economy got into difficulty, was that Australia fundamentally was a higher than normal risk place in the developed world. One of the things that I looked at was the medium-term, short-term earnings volatility, both medium-term in the past, what was the short-term interest rate volatility in the country? I ranked the major developed countries in the world, including Australia, and expected to see Australia as having the highest volatility.Now there's changes in government policy, whatever, creating dislocation, volatility through local management issues. Number one was Britain interestingly, not Australia, and I was running Citibank with UK at the time, so I had some insights about Britain as well.When you looked at the names, Harlin …. You know the names. When you look at all the names associated with that, you then say, how did you get into this? And so I had this sort of bias. Well of course, when it emerged, seven years later, [Australia] was a very different place, it actually had done very well.And so those memories were not particularly useful, and beyond that, I didn't really know very much about Australia. By that point in time, including here, I've probably overseen banks in about 60 or 70 countries, and so I wasn't consumed by Australia, but I had a good sense of what a developed country banking system should look like. In Australia, it looks pretty much like that.Ian Rogers: What do you make of the Australian business scene now, and how would you rank Australia's entrepreneurial culture?John McFarlane: One of the attractiveness's of Australia is you're in the sixteenth year of uninterrupted economic growth. We've created incredible amounts of wealth. I mean massive amounts of individual wealth here, plus low interest rates in the world have created an enormous amount of wealth for ordinary people.Of course that leaves people outside the net, and