That is the view of Reserve Bank of Australia governor Glenn Stevens.

Stevens was in Perth last week to deliver the Shann Memorial Lecture to a nearly packed house at the University of Western Australia’s Octagon Theatre.

His point is that through history there have been cycles where regulation has been increased and then lessened. Each time regulation was tightened, the financial sector found ways to get around it.

The important thing, he argues, is that finance still be allowed to occur efficiently.

Without easy access to finance, many resources projects grind to a halt. This was demonstrated to devastating effect when the global financial crisis struck in 2008.

The after-effects of that linger on.

One member of the audience asked Stevens why there were so few foreign banks in the Australian market.

He answered that it would be hard for a foreign player to compete against the branch structures already created by the local players. They had, however, been active in the corporate finance end – until the GFC.

In perhaps overly simplistic terms the GFC was caused by incautious lending coupled with a lack of capital backing.

So would increased regulation have stopped it? In Stevens’ view, no.

“The environment drives risk taking,” he said. “Regulation decides where it will happen. That may be a bit of an extreme view but I think there is some truth to it.

“International debate has been consumed with the issue of financial regulation.

“A big part of the answer has to come from practice rather than black letter law. The financial area has to become less exciting.

“There has to be more responsibility about where risk ends up and the sector has to be much better capitalised than it was.”

That does not mean that regulation and regulators cannot play a part.

Stevens said adhering to minimum standards was not good enough, pointing to the Australian Prudential Regulatory Authority as a case in point.

In the post GFC world there has been a lot of emphasis on the capital backing of financiers.

“It’s not been uncommon for Australian bankers to complain about APRA’s strict rules of capitalisation,” Stevens said.

“But APRA was right. Internationally there has been some heated debate, and I can tell you it has been heated, about what is and isn’t capital. They are moving towards APRA’s approach.”

While some increased regulation would help, there has been a feeling of stable door, horse bolted about the furore following the GFC.

Stevens is of a similar view. He argues that legislators should step up during a boom, not a crash.

Another audience member raised the point of the lack of experience in the financial sector.

He pointed to a Bear Stearns advertisement proudly pointing to the fact that its staff had an average of 13 years experience. That length of time was not enough to maintain any sort of memory of financial crises past.

Stevens agreed but was unsure how to deal with that.

After all, engineering a crisis for the sake of experience may not necessarily be the best way to go.

“It could also be said that many people in the workforce haven’t experienced a major recession as there hasn’t been one for near on 20 years,” Stevens said.

“I don’t mean we should give them one just to get a taste.

“It’s a matter of having enough grey hair, or in some cases lack of hair, around.”