When finance ministers of the Group of 20 nations, including Treasurer Wayne Swan, sit down in Washington this week to review developments in the world economy and proposals for financial sector reform, there will be a behemoth in the room, unseen but not out of mind.

The US Securities and Exchange Commission announcement that it would bring a suit against Goldman Sachs - alleging it was party to a scheme that defrauded client trading in so-called 'synthetic' securities that bore little relation to the acutal home mortgage assets they purported to represent - is a seismic event whose consequences will ripple across the world financial system for years to come.

Those ripples will be felt in the offices of australia's own regulatory agencies, in the executive suites of the major banks and in the office towers that house would-be Australian imitators of the Wall Street model, epitomised by Goldman Sachs, widely regarded as the gold standard of investment banking.

The Australian Prudential Regulatory Authority, whose remit is broader than its US counterparts, needs to satisfy itself anew that institutions under its scrutiny are not engaging in risky practices that might jeopardise their own financial well-being, that of their shareholders (the Australian public) and the banking system itself.

"APRA will need to have a look at the investment banking community in Australia to ensure these practices are not prevalent," says Thomas Clarke, director of the Centre for Corporate Governance at the University of Technology Sydney.

-AFR p.70 in the Print Edition