Banks based in Australia have been warned to avoid the temptation of lowering their credit standards or making excessive cuts in order to boost their profitability.
A new report published today (28 March) by the Reserve Bank of Australia (RBA), has indicated that while the country's banking system is currently in a "relatively strong position", this could be jeopardised if financiers try to chase "unrealistic profits".
This represents an improvement on the central institution's last Financial Stability Review published six months ago, but official's have urged lenders to make sure they do not undermine this trend.
The RBA insisted that the global economic recovery remains at risk because of issues such as the ongoing eurozone debt crisis, meaning banks cannot afford to be complacent.
Financiers' profits have been "robust" in recent times, the report added, but the RBA went on to indicate the "slow credit growth environment could constrain the pace of their future profit growth".
By Asim Shah