Individual banks are "more likely to focus on their own risks, rather than the risks to the system as a whole," Reserve Bank of Australia governor Philip Lowe said last night.At a talk to a business dinner in Brisbane, Lowe used a long defence of stability in monetary policy settings to ponder the place of related macroprudential measures."In striking the appropriate balance in our policy setting, we have paid close attention to trends in household borrowing, given the already high levels of debt," Lowe said."Over the past four years, household borrowing has increased at an average rate of 6.5 per cent, while household income has increased at an average rate of just 3.5 per cent. Given this, the RBA has worked closely with APRA to ensure that lending practices remain sound. "Rightly, APRA has had a strong focus on loan serviceability calculations. In some cases, loans were being made where the borrower had only the slimmest of spare income. "APRA has also introduced restrictions on growth of investor loans and restrictions on interest-only lending. This has been the right thing to do."Adding weight to his theme, Lowe asked: "One might ask why lenders themselves did not do more to constrain their activities in these areas, given the earlier trends were adding to risk in the overall system."When everything is going well, it appears that any single institution has difficulty pulling back. Each worries about their competitive position and about the market reaction. Individual institutions are also more likely to focus on their own risks, rather than the risks to the system as a whole. "This means that supervisory measures can be useful in helping the whole system pull back. "Ideally, such measures would not be needed, with instead the appropriate level of restraint coming out of lenders' holistic risk assessments. But when this does not occur, supervisory measures can play a constructive role."Most lenders, Lowe added "are now operating comfortably within the new restrictions and these measures are not unduly restraining the supply of overall housing credit."