I've made the point a few times that when it comes to monetary policy and other regulatory actions it matters rather less what people say on chat forums and rather more what the Reserve Bank of Australia (RBA) and APRA say, since ultimately they are the bodies tasked with making the key decisions.
While plenty of people disagree with the RBA, a couple of hours spent reading yesterday's Financial Stability review should tell you how comprehensively the central bank assesses risk.
Fortunately, I spent the two hours so you don't have to.
The four points you're probably most interested in:
The RBA reported that the banking sector got stronger in 2013 - asset performance is improving and bad and doubtful debt charges declined.
Having increased from essentially nil in 2003, bank's non-performing loans are now declining as households enjoy very low interest rates.
Businesses too, are finding the terrain a little easier than they were during the financial crisis, and bank loan books look much healthier for that.
Those are the bare numbers, but a bit of context here might be helpful:
Low-doc lending continues to represent less than 1% of loan approvals, while the share of loan approvals with loan-to-valuation ratios (LVRs) greater than or equal to 90% has been fairly steady since 2011 at around 13%.
The share of banks’ funding sourced from domestic deposits has increased from about 40% in 2008 to around 57% currently.
That's a good thing.
Australia's major banks (classified by APRA as "D-SIBS) have bolstered their capital and funding structures since the financial crisis and are in fact already well-placed to meet APRA's more stringent Basel III capital requirements which will kick in in 2016.
Banks are generating imperiously strong, comfortably double-digit returns on equity (ROE) and colossal net profits after tax (e.g. even after tax Commbank cleared a net profit of $7.8 billion in their 2013 financial year - before tax the figure was closer to $11 billion).
Surely then, herein lies a golden opportunity to enforce the strengthening of capital ratios further through earnings retention, reducing dividend payments or scaling back share market purchases in order to offer dividend reinvestment plans (DRPs).
Of course, bank execs will want to continue chasing the golden egg of 15% ROEs through reinvestment and greater expansion of their loan books, but if our major lenders are to receive an implicit government guarantee then, stuff it, make them shore up their capital ratios, I say.
It would be better for everyone over the long term.
Housing loan approvals are picking up across Australia, but are really firing in New South Wales (read Sydney).
The Reserve Bank is very keen to ensure that lending standards in Australia remain high.
There is much more besides which you can read here, but that is the flavour of the report.
Lending standards will be monitored but on the face of it the RBA appears to be more focused on aggregate loan impairments and indicators of financial stress than dwelling prices.