The Reserve Bank has repeated its message that it is important that banks maintain a prudent risk appetite and prudent lending standards, especially in the current low interest rate environment.However, in its latest Financial Stability Review, published yesterday, the RBA acknowledged that data on the characteristics of housing loan approvals suggested that banks have "broadly maintained" their lending standards.It also found that non-price loan standards, such as loan serviceability tests, have remained "fairly steady". The review said: "Banks are having to adapt to an environment where their balance sheets grow more in line with borrowers' incomes and the broader economy. It is important that they do not respond to pressures to boost revenue by imprudently loosening their lending standards or by making ill-considered moves into new markets or products. "Based on the available evidence, these responses do not appear to be occurring at this stage."The RBA said that over the past six months the asset performance of Australian banks had continued its steady improvement of recent years. The banks' ratio of non-performing loans to total loans was 1.4 per cent - down from a peak of 1.9 per cent in mid-2010.Around 2.5 per cent of banks' domestic commercial property exposures were classified as impaired at June 2013 - down from a peak of around six per cent in mid-2010.The share of housing loans that were non-performing remained fairly steady, at around 0.7 per cent.The aggregate share of the value of banks' housing loan approvals with high LVRs (that is, above 90 per cent) increased throughout the second half of 2010 and during 2011, but has been fairly steady since then.The interest-only share of housing loans appears high at a little under 40 per cent. The share of loan approvals classified as low doc was unchanged in the first half of 2013.The outstanding value of non-conforming securitised housing loans has doubled since its trough in April 2012, although it remains a very small share of total housing lending (an estimated 0.2 per cent of housing credit in July).The RBA said: "In the residential mortgage market, competition for new borrowers in the past six months has seen some lenders reduce interest rates, increase upfront commissions for brokers and waive application fees."Non-price loan standards, however, appear to have remained fairly steady over recent quarters. During the past year some banks have increased the size of the interest rate add-on they apply to their lending rate when assessing borrowers' loan servicing capacity, although not always to the same extent as the decline in interest rates."The RBA found more evidence of higher risk-taking among small lenders. It said the loan performance of the smaller Australian-owned banks was weaker than that of the major banks. This is also the case for foreign-owned banks."A number of mid-tier banks and smaller lenders have expanded into new distribution channels or geographical markets, while a range of banks have been growing their residential property lending to self-managed superannuation funds rather strongly. "Because they can expose lenders to different risks, including