This paper reviews the nature of Australian bank prudential regulation before and after the Global Financial Crisis (GFC). It provides a detailed conceptual framework for understanding the functions of banks and deposit-takers, the theory of what can go wrong with the operation of these institutions, and the logic of prudential regulation. It traces developments in Australian prudential regulation from the introduction of the formal capital-based framework in the 1980s to the implementation of the Basel III regime after the GFC. The paper concludes that i) the introduction of the Financial Claims Scheme was a clear and welcome change compared with pre-GFC arrangements; ii) the introduction of the Basel III liquidity regime constituted a more fundamental modification, best characterised as a significant refinement to the riskbased calculation of capital than as a fundamental change to regulatory philosophy; iii) the Australian Prudential Regulation Authority (APRA) had been practising macroprudential regulation well before the GFC even though Australia’s adoption of Basel III’s macroprudential apparatus appears on the surface to constitute a genuine innovation in prudential regulation; and iv) the importance of financial stability as a policy objective and the nature of macroprudential regulation raise questions about the wisdom of having split monetary policy and prudential regulation functions in 1998, and a revisit of this question and a reassessment of institutional structures are called for.