Australian Prudential Regulation Authority chairman John Laker has warned that the prospect of "life in the slow lane" may tempt shareholders to make banks take more risk or to weaken risk management.Writing in APRA's annual report, Laker said that "those temptations must be resisted in favour of more measured strategic ambitions".Banks could take on extra risk either by lowering credit standards or by "seeking new and unfamiliar markets where they may have little comparative advantage", he said.That second route to extra risk appears to match the ANZ's strategy of expanding in Asia, though Laker did not mention the bank by name.ANZ's CEO, Mike Smith, has reaffirmed the bank's interest in buying Asian assets from troubled European banks, telling Business Spectator that "we're sort of like some predator on the fence post, gazing at what's going to die". Smith said the 2009 acquisition of Asian businesses from Royal Bank of Scotland Group has "taught me a lot about the organisation", and that the bank was "in good shape to do a pretty big deal".Laker also used the APRA annual report to warn against the temptation to "aggressive cost-cutting that may weaken risk management capacities". That warning comes as the banks are under pressure to cut costs in response to slowing underlying profit growth.Laker revealed that the regulator has lifted its level of engagement with bank boards, an activity he called "central" to APRA's supervisory approach. And among the top issues for discussion with bank boards has been housing lending, which, he said, had seen "a continued upwards drift in loan arrears and intensifying competition".APRA had written to the boards of the largest bank housing lenders "reminding them of the need to be alert to any deterioration in housing lending standards", he said."APRA received the assurances it sought," he said. "The decision to write such a letter to, and seek specific assurances from, boards rather than management was designed to have boards question the lending practices of their institution more deeply than they might have been doing."The APRA chairman also appears to be pushing for a continuation of the four-year emergency funding provided in the wake of the 2008 crisis.Pointing to current European strife, Laker said: "The crisis is entering what the International Monetary Fund has described as a 'dangerous new phase' and APRA will need to maintain the intensity of its supervisory and policy activities in the current year, and possibly beyond the current year."Laker described APRA's supervisory resources as "at the lower end of the scale compared with many other supervisory agencies".