The iconoclastic take on home loan concentration risks in banking is now the orthodoxy. A switch in thinking outlined by APRA chair Wayne Byres yesterday defines the outlines of a future crisis that financial regulators are now racing to deflect.In a landmark speech yesterday at the AFR Banking & Wealth Summit in Sydney, the Australian Prudential Regulation Authority chair said risk weights on banks' housing loans would be lifted once more - which is no great surprise, although the weighting, timing and modelling on the extra capital required by Australian banks were vital statistics omitted by Byres.Overturning years of lenient analysis on the relative risks to the banking sector Byres said: "By anyone's standard, we have a banking system that has a notable concentration in housing."On timing for reform on capital rules, he said: "as things stand today, our plan is to issue an information paper around the middle of the year, which will set out how we view the banking system through the various lenses mentioned, the extent of further strengthening required, and the timeframe over which that can be achieved in an orderly manner."Anticipating guesswork around revised risk weights and capital goals, Byres set out to hose down extreme views.His speech, he said, "should not be taken to imply that there will be a dramatic increase in capital requirements for housing lending."APRA has always imposed capital requirements for housing exposures that are well above international minimum standards, so we do not start with glaring deficiencies."As the latest in a sequence of coordinated actions and persuasion by financial regulators with a macroprudential theme, Byres used delicate language to set out his purpose."Our role in the current environment is to promote a higher-than-normal degree of prudence - definitely by lenders and, ideally, also borrowers - in both credit decisions and balance sheet strength," he said."We [are] developing a more strategic response that recognises that, in the Australian banking system, housing lending risks and capital adequacy are far from independent issues."Byres thus reinforced themes covered by Phillip Lowe, governor of the Reserve Bank of Australia on Tuesday night.The APRA chair then got to the meat of the matter, credit risks in housing, which frame the approaching decisions on setting new capital benchmarks for banks.APRA is discarding one tenet of longstanding policy on patrolling bank capital, thus yielding to the critique of a dissenting band of economists and financial market commentators (think Steve Keen, now from Kingston University in London, or the stirrers at the economics and markets publication MacroBusiness).Put simply, Byres said, "the capital adequacy framework needs to address the concentration in housing lending that has built up in the banking system over time. If we are going to put an increasing number of eggs into a single basket, we'd better make sure that basket is an unquestionably strong one."He conceded that past thinking was that "a high and increasing concentration in mortgages generates a lower risk banking system."At APRA, this thinking is obsolete.Byres said: "In the current environment, it is