The vulnerability of Australia's banks to some form of "global panic" has diminished over recent years and financial markets are not "signalling serious concerns about Australia's solvency or sustainability", Glenn Stevens, governor of the Reserve Bank of Australia said yesterday.Stevens used his speech to survey - and rebut - a number of the mawkish arguments advanced to portray the financial risks facing Australian households and businesses.The RBA governor centred his survey on the perennial debate over whether or not housing prices are overvalued. After reviewing the (complicated) evidence around price-to-income ratios and related measures, Stevens concluded that "none of this can be taken to say definitively that Australian dwelling prices are 'appropriate', or that there is no possibility they will fall.""It is a very dangerous idea to think that dwelling prices cannot fall. They can, and they have. "The point is simply that historical or international comparisons, to the extent they can be made, do not constitute definitive evidence of an imminent slump."Stevens also pointed to data on borrower behaviour in relation to their home loans."The main story", he said, "is that not much has changed. Arrears remain low and if anything have been edging down over the past year."Stevens said that debt-servicing burdens had declined and that the repayment on a new loan on a median-priced house as a share of average income was at its lowest level for a decade. (This comparison, however, leaves aside the lower repayments made during the period of very low interest rates in 2009, following the onset of the financial crisis.)Stevens also provided some up-to-date data on lender repossessions of dwellings.He said these were running at about 0.15 per cent of dwellings on an annualised basis and this ratio had declined in New South Wales and Victoria, though it was on the rise in Western Australia and Queensland. On the funding vulnerabilities of banks, Stevens noted that "there has been a net outflow of private debt funding over the past two years, offset roughly by an increased inflow of foreign capital into government obligations.""This has occurred with a net decline in government debt yields and a net rise in the exchange rate. The current account deficit has, in other words, been easily 'funded' without the assistance of banks borrowing abroad - in fact, they have been net re-payers of funds borrowed earlier."A reasonable conclusion is that the degree of vulnerability to a global panic of any given magnitude appears to have diminished, rather than grown, over the past few years. "It hasn't completely disappeared, and it would not be sensible to expect it would, unless we were pursuing a policy of financial autarky. "But there is little reason to assume that Australian institutions are somehow unusually exposed to these risks compared with most of their counterparts overseas."