Rapid growth in loans to investors and related forms of higher risk lending by banks will draw elevated "supervisory intensity" from financial regulators over coming months.Any bank found to be taking on undue risks faces the prospect of a lift in their target minimum capital ratio by the Australian Prudential Regulation Authority.Growth in loans to investors of more than ten per cent will be one benchmark APRA looks at.The Australian Securities and Investments Commission will also conduct "surveillance" into the provision of interest-only loans "as part of a broader review by regulators into home-lending standards."The steps by APRA and ASIC fall short of a shift to an embrace of a "macro prudential" bias in banking supervision in Australia, but are a nod in the direction of this option.ASIC yesterday flagged "concerns by regulators about higher-risk lending, following strong house price growth in Sydney and Melbourne."It said that, through the Council of Financial Regulators, ASIC, APRA, the Reserve Bank of Australia and Treasury were "working together to monitor, assess and respond to risks in the housing market."ASIC singled out interest-only loans as a percentage of new housing loan approvals by banks reaching a high of 42.5 per cent in the September 2014 quarter as one point of focus.APRA is also concerned at a trend of lenders promoting interest-only loans to owner-occupiers, which may be in response to a reduced ability to pay.In a letter to banks and ADIs yesterday, Wayne Byres, chair of APRA, said that it "does not propose to introduce increases in system-wide capital to address current risks in the housing market, or introduce new regulatory limits, although we will keep these options under active review. "Instead, it said that "based on our current assessment of the risk outlook, however, APRA considers that it is necessary to further increase the level of supervisory intensity in this area, to reinforce sound lending practices, with a particular focus on some specific areas of prudential concern."APRA described "higher risk lending" as including "a high proportion of lending at high loan-to-income ratios, lending at high loan-to-valuation ratios, lending on an interest-only basis to owner-occupiers for lengthy periods and lending at very long terms."If an ADI "is undertaking large volumes of lending in these categories, or increasing this higher risk lending as a proportion of new lending, this will be a trigger for the consideration of supervisory action," said APRA.The "very strong growth in investor lending," received particular emphasis by APRA. It said "annual investor credit growth materially above a benchmark of ten per cent will be an important risk indicator that supervisors will take into account when reviewing ADIs' residential mortgage risk profile and considering supervisory actions."Serviceability policies will also come under scrutiny, with the regulator declaring loan assessments must "incorporate a serviceability buffer of at least two per cent above the loan product rate, with a minimum floor assessment rate of seven per cent."