The "heavy lifting on lending standards has largely been done", Australian Prudential Regulatory Authority chairman Wayne Byres told an audience of economists in Sydney yesterday.
"Any tightening from here on is expected to be at the margin as banks seek to get a better handle on borrower expenses, and better visibility of borrower debt commitments," he said.
Mr Byres said the cumulative growth in credit in the 3½ years since APRA intensified its focus on lending standards was greater than the credit growth in the preceding 3½ years.
"Credit growth appears to be slowing somewhat at the moment, but that is not surprising in an environment of softening house prices and rising interest rates," he said in a speech titled Preparing for a Rainy Day.
Mr Byres also pointed to the relative strength of lending to owner occupiers, which has grown at three times the rate of household incomes, during a "period in which lending policies and practices have been gradually strengthened".
APRA's efforts had led to a reduction in high loan to value ratio lending, and a slowdown in investor and interest-only lending.
"These trends in higher risk lending, however, only tell part of the story. They have also coincided with a strengthening in the rigour with which banks assess borrowers' ability to service and repay their loans."
Conintued improvement was being sought with more accurate assessments of borrowers' incomes and expenses and better verification of existing debt commitments.
