With APRA's macroprudential focus successfully curtailing the growth of loans to investors, the banks are now looking to their internal processes to improve the quality of their loans.

The move reflects APRA and ASIC's shift in regulatory emphasis away from macroprudential measures toward curbing banks' risky internal lending practices, according to reports in The Australian Financial Review.

This year, APRA has focussed on restricting increases in interest-only loans, which has caused a significant decline in loans to investors, easing pressure on real estate prices and allowing first-home buyer numbers to rise.

Wayne Byres, chairman of Australian Prudential Regulation Authority, giving evidence to the Senate economics committee last month, allowed for the potential to redeploy resources within APRA when he claimed its 30 per cent benchmark for interest only lending for new loans "looks like it has been comfortably achieved overall".

The Australian Financial Review reports that banks are now tightening credit policies in response to a regulatory shift in emphasis.

Macquarie Bank has updated its credit policies, requiring more information about borrower's debts, income and their ability to repay loans in changed circumstances, in an attempt to improve the quality of the bank's loans and ensure borrowers will be able to repay.

Last month, Westpac toughened its home loan application processes by requiring applicants answer more questions to show how they will be able to repay loans. The new processes are designed to make it harder for borrowers to 'lie' on their applications. 

And NAB has revealed this week that it has sacked 20 employees and disciplined another 32 for selling mortgages without the correct customer information and documentation.

NAB has identified approximately 2,300 home loans since 2013 "that may have been submitted without accurate customer information and/or documentation", according to a statement from the bank.

NAB is now reviewing the problematic loans, and may offer customers compensation. NAB says it has "engaged with ASIC to ensure the remediation program provides fair outcomes for customers" and will update ASIC "every two months" on the review.

“I want to assure all of our customers that we have improved our systems, processes and programs as a result of what occurred here,” said NAB's Chief Customer Officer, Consumer Banking and Wealth, Andrew Hagger.

Australian Securities and Investments Commission has raised concerns about the accuracy of loan applicants capacity to service borrowings in the past, and UBS research has also raised the possibility that up to one-third of all home loans in Australia could be 'liar loans'.

John Flavell, chief executive of Mortgage Choice, told The Australian Financial Review, "We have definitely seen a tightening in lender policy with lenders increasingly looking for more detailed customer information.

"These changes are being driven by the lenders themselves as well as feedback from the industry regulator and the corporate watchdog."

Read more about APRA's regulatory changes:

One third of all home loans based on "lies": UBS

APRA tightens bank rules to restrict risky lending

APRA measures push investors out, let first-home buyers in