The nation's big four banks face being forced to put away billions of dollars after the banking regulator found their survival was vital to the Australian economy and taxpayers.
The Australian Prudential Regulation Authority said the four - NAB, Commonwealth, Westpac and ANZ - were considered by most Australians as "too big to fail" because of their size, importance to the economy and interconnectedness.
It said while they were perceived as too big to fail that did not mean governments had to step in if they ran into financial trouble.
In a paper outlining its proposals, APRA said the banks had to have the financial wherewithal to "absorb losses (and) to increase their resilience to failure".
The issue of banks considered of such importance to the global or a domestic economy has dominated regulators since the global financial crisis and the decision by US authorities not to prop up Lehman Brothers investment bank.
APRA found the big four dwarfed all competitors. Westpac and the Commonwealth hold 22 per cent of Australian bank deposits each.
The fifth biggest bank, Macquarie, holds 6 per cent.
To protect banks from themselves and taxpayers, who would face bailing out one of the big four if they ran into trouble, APRA has proposed an increase in how much each must set aside for potential trouble. This capital, a full percentage point of a bank's assets, will be on hold in case an institution runs into trouble.
The financial impact on each of the big four will vary, though dividends are likely to be sliced slightly. ANZ and Westpac said they already had more capital set aside than the APRA recommendation.