The banks and their shareholders exhaled a collective sigh of relief on Wednesday when the financial regulator pronounced that they were pretty damn close to being 'unquestionably strong' - at least close enough that adding that last layer of capital fat wouldn't be difficult.

There was applause from the sharemarket which pushed up the combined value of the four big Australian banks by around $14 billion in early trading.

David Murray, the author of the Financial Services Inquiry and the architect of the push to make the Australian banking industry less risky, isn't signalling that it's all plain sailing though.

When asked if the levels of capital the regulator, APRA, had settled on were sufficient, he said we will "never know and only time and a financial disaster will tell you if you are right or wrong".

He rightly points out that the credit market in Australia is particularly benign at the moment, thanks to the fact that the level of default from consumer and business loans is very low.

While Murray was positive about the move to increase capital and reduce risk in the industry and said it "added some needed stability", he was still alive to the notion that there are risks in the industry - not the least of which was the possibility of the government's sovereign credit rating deteriorating, which would in turn have a negative effect on the banks.

"The system is only as strong as the balance sheet of the Commonwealth government," he said.

And of course the issue of the housing market is another sleeper that could potentially burst the euphoria bubble that was surrounding the banks on Wednesday.

But few were focused on the potential negatives or additional risk initiatives that APRA may have in mind further down the track.

As far as investors were concerned, the banks would be able to increase their capital buffers without having to ask shareholders for the money to do it.

Indeed the ANZ, which has the strongest capital position, is already close to the new levels that will need to be reached by APRA's 2020 deadline and is expected to reach the target in a year.

Together the big four need to boost capital by about $8 billion. They have capacity to do so through using mechanisms like enhanced dividend reinvestment schemes.

The Commonwealth Bank - whose capital levels are at the lower end relative to its peers - seemed happy enough with APRA's decision.  

"CBA is well positioned to meet this new capital benchmark. Financial strength is a key priority of CBA's strategy, and we constantly monitor our capital position and any potential regulatory change which may affect our capital," finance chief Robert Jesudason said.

In other words - nothing to worry about here.

Better equipped to weather storms

Of course the initial shareholder enthusiasm will be short-lived if the new capital measures place pressure on dividends - which is a distinct possibility given the banks have to find the money to pay the government's additional levy placed on their profit.

APRA has not yet announced new risk weights on mortgages, which are expected to rise from current levels.

This means that on top of the $8 billion capital boost just ordered by APRA, banks will need to hold an estimated $8 billion of additional capital against home loans.

As UBS analyst Jon Mott said on Tuesday, if one adds up all these regulatory capital changes, the banks will have been forced to boost capital by $40 billion since Murray's Financial Services Inquiry was released in 2014.

But from a regulatory capital perspective it looks like the industry now has some certainty.

Bank profits will still move around and the risk of home loans delinquencies is still alive, particularly if the Reserve Bank decides to push through a few interest rate rises in 2018 - an outcome which is now expected.

But having increased capital allows banks to better weather any storms down the track.

Whether APRA has gone far enough, as Murray says, depends on what category storms they will be.