Interventions by APRA that curtailed riskier mortgage funding by banks "have served their purpose, and we have seen lending standards improve," Wayne Byres, head of the prudential regulator said on Friday."Recent data for the last quarter of 2017 shows that only about one in five loans were interest-only, and the number of interest-only loans with high LVRs continued to fall to quite low levels. All of that is positive for the quality of loan portfolios," Byres told the Australian Economic Forum in Sydney. "Our most recent intervention was in relation to interest-only lending," he reminded his audience. Around this time last year APRA set a limit of 30 per cent for interest only loans of all bank home loan funding, a cap Byres said was "observed across the industry by late last year."This share of interest-only loans "has declined most notably for investors, although it remains higher than the share for owner-occupiers," the Reserve Bank of Australia elaborated on Friday in its quarterly Statement on Monetary Policy. Byres said that "imposing quantitative limits is not our preferred modus operandi, but over many years we'd seen interest-only loans become easily available, and options for extending or refinancing on interest-only terms allowed borrowers to avoid paying down debt for prolonged periods. "Our benchmark of no more than 30 per cent of new lending being on interest-only terms is not overly restrictive for borrowers who genuinely need this form of finance - roughly one in three loans granted can still be on an interest-only basis - but it has required the major interest-only lenders to establish strategies that incentivise more borrowers to repay their principal. The industry has been quite successful in doing so."Byres did not address the criticism of the profiteering consequences of this policy in last week's report from the Productivity Commission on competition in retail banking.APRA's crackdown on lending practices last year - which triggered a sharp repricing of mortgages - delivered "a windfall gain to the banking sector" the Productivity Commission stated last week in its interim assessment of competition in the domestic retail banking sector.Byres instead kept his focus on matters of underwriting standards and thus stability of banks.He said that "while the direction in asset quality is positive, we're not declaring victory just yet. We still want to see that the improvements the industry has made are truly embedded into industry practice."And we can modify our interventions as more permanent measures come into play. That will include, amongst other things, further strengthening of borrower serviceability assessments by lenders, strengthened capital requirements for mortgage lending imposed by us, and comprehensive credit reporting being mandated by the government."