The banking watchdog can't regulate for "good" corporate culture, saying that's something the industry has to work out for itself.
Australian Prudential Regulation Authority chairman Wayne Byres says it's looked at banking and insurance industry practice but corporate culture can't written into law.
"Ultimately, it is for the industry to determine what culture it has. It is not something we can just regulate into existence," he told an Senate committee hearing in Canberra on Thursday.
Mr Byres believes APRA's tighter lending standards have slowed the growth in housing credit.
"That's a good thing," he said.
APRA was conscious that in an environment of low interest rates, high household debt, rising house prices in major cities and subdued income growth, "it is time for caution".
"What you hope through all of this is banks making sensible loans to customers who can afford to pay them back. If banks do that, it's in everyone's interest," Mr Byres said.
He hoped the higher standards would take the heat out of the apartment market.
