The bank regulator says it has done the "heavy lifting" on home loan standards, and even a major housing crash would not sink Australia's big banks.

In a speech to Australian Business Economists — many of whom work for the institutions the Australian Prudential Regulation Authority (APRA) oversees — the regulator's chairman Wayne Byres downplayed its moves to limit risky home lending.

"Despite the prominence it has been given, our goal in seeking to reinforce standards and practices has been relatively modest: ensuring that internal policies are followed in practice, and applying what is, in most cases, a healthy dose of common sense," he said.

"While there is more 'good housekeeping' to do, the heavy lifting on lending standards has largely been done.

"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."

Not that the "relatively modest" improvement in lending standards has been completely painless.

"As we 'peeled the onion' through our reviews and examinations of lending standards, we encountered a new layer at each step: enhanced oversight was not always translating into more prudent policies, and more prudent policies were not always translating into more prudent practices," Mr Byres observed.

"And, just like peeling an onion, it hasn't always been easy on the eye.

"Implementing a policy of interest rate buffers within serviceability assessments only makes sense if these are used in practice and not overridden by frontline lenders, and applying these buffers to a borrower's other existing debts only works if information on those debt commitments is properly sought."

Big banks would survive 35 per cent house price crash

However, in light of what he sees as their "modest" nature, Mr Byres questioned analysis suggesting that the tighter lending standards were the primary driver of slowing loan growth.

"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.

Mr Byres also noted that housing credit growth remained about 6 per cent over the past year, only just below long-term averages and in line with the average since 2011 — a period he observed covered the last time Australian home prices had eased nationally.

Deutsche Bank's Phil Odonaghoe said he viewed the remarks as "upbeat", with Mr Byres effectively saying "job done" when it came to improving previously lax mortgage lending standards.

Investors in the major banks agreed, with their share prices bouncing back from earlier, steeper, falls on the speech, as traders viewed the chances of increased regulation, such as a strict debt-to-income limit, as less likely.

However, while the news may have been good for the banks, the APRA boss gave no hint that lending standards might be loosened to rekindle Australia's slowing major east coast housing markets.

Mr Odonaghoe said the APRA boss seemed distinctly unconcerned by recent home price falls.

"Rather, Byres sought to outline the anticipated resilience of banks in a 'stress test' environment in which house prices fell sharply," he observed.

"Bottom line? In our view, the speech reinforces the relative sanguine response from regulators to date about recent housing market developments."

The stress test of 13 of Australia's largest banks, conducted last year, assumed that a downturn in China triggered a commodity price collapse, a resulting downgrade in Australian government and bank credit ratings, and a temporary closure of access to offshore funding.

As a result, the scenario factored in a 4 per cent decline in Australia's GDP, a doubling in unemployment to 11 per cent and a 35 per cent crash in home prices nationally over three years.

While the banks would incur large losses in such a scenario, APRA found that none would breach their minimum capital requirements, even if they did not, or could not, raise fresh equity through share sales.

That means, in theory at least, that none of these 13 banks would require government bailouts.