be encouraging as many payments as practicable to move onto that system. the next major frontier is to reduce the settlement risks of australian banks in their international transactions. this will be, if anything, more challenging than domestic rtgs has been, but some progress is being made internationally. i suspect that there is as much to be done to improve the efficiency of the australian payments system and the “ fairness ” of access arrangements to retail payments streams. the accc has recently found wanting the basis on which smaller players may negotiate participation in the eftpos system. i should emphasise that it will be the rba ’ s intention to adopt as light a regulatory touch as possible over the payments system. there has, after all, been a good deal of recent progress in reforming that system without the bank having explicit powers. we hope such progress will continue - - through the australian payments clearing association and other industry - based bodies. only where payments arrangements fall short of our efficiency and safety benchmarks - - and there are no serious attempts by the industry to rectify that position reasonably quickly - - will we embark on the path of prescriptive regulation. end piece it is a truism that change is always with us. but i suspect that banks face more than their fair share of it in coming years. i hope my remarks will be useful background for your speculation about the details of this change over the next couple of days.

source of assets for the expanding securitisation market - - total assets in securitisation vehicles would now be over $ 20 billion, double the level of two years ago. ) • bank credit ( net of securitisation ) has grown at an annual rate of around 10 per cent so far in 1997, compared with about 12 per cent during 1996. the main categories have all grown at close to this average. • asset quality is in good shape, with impaired assets at 0. 8 per cent of assets in june 1997, compared to 1. 1 per cent a year earlier. loan write - offs have continued to fall, and loans newly identified as impaired each quarter remain both low and steady. banks are responding to margin squeeze on several fronts. there has been further unwinding of the longstanding cross - subsidisation of transactions and account - keeping services out of interest margins. there is a continuing drive to cut costs - - through rationalising branch networks, trimming management structures and investing in labour - saving technology. this has included closer investigation of the potential savings from outsourcing non - core activities ( such as cheque processing and information technology ) and sharing basic facilities, and the past year has seen some important initiatives of this kind. - 2regional banks, in particular, are looking to diversify their loan portfolios to reduce their dependence on home lending. but all banks are, to varying extents, pursuing a wider range of revenue sources as competition intensifies in traditional business lines, and areas such as funds management seem to offer better long - term prospects. through acquisitions and organic growth, the ratio of banks ’ funds under management to balance sheet assets has risen to around 30 per cent from 20 per cent four years ago. ( despite these efforts, it is interesting that there has been no increase in the ratio of banks ’ domestic non - interest income to domestic assets. ) the closer management of bank capital has been another notable feature of the past year or so. one result has been the major banks ’ share buy - back programs and the repurchasing / restructuring of subordinated debt. the rba has a keen interest in these developments, given the centrality of capital in our supervisory system. closer alignment of capital with risks inherent in a bank ’ s activities ( and prospective balance sheet growth ) is, of course, not to be discouraged. a banking system with excessive capital will be less efficient and less competitive in performing its financing role