The bad debt expense to the profit and loss may be falling away for Australia's major banks, and thus supporting profits, but asset quality in general continues to get worse among the industry's dominant suppliers of credit.Impaired loans across ANZ, CBA, NAB and Westpac stood at $22.6 billion at the end of June 2010, the latest round of "pillar 3" disclosure by the banks shows. This is up around $1 billion over three months and up by $5 billion over one year.There is no real surprise in these trends given the sharp turn in the credit cycle brought about by the financial crisis, and the recessions in New Zealand, the United States and Europe, even if Australia's economy avoided the job-destroying slowdown in activity that was common elsewhere.There are some complications in drawing conclusions on present trends in impaired loans.ANZ's are rising recently thanks to its takeover of six RBS regional businesses in Asia. However, ANZ's ratio of impaired loans to credit exposures, at 1.23 per cent, is elevated largely due to its business mix in Australia and especially New Zealand, where its market share of banking is around 40 per cent.Westpac has also buffed its own asset quality ratios in the last quarter given the revised assessment of most loans acquired through the takeover of St George Bank. Westpac now assesses these under the more sophisticated (and favourable) methods used across the rest of the bank.A review of the quarterly disclosures on credit by Australia's big banks also provides an opportunity to take a snapshot of their different business mixes as reflected in their aggregate exposures for credit, as well as their risk-weighted assets (with the latter relevant to working out capital ratios).One interesting take away is that CBA, NAB and Westpac all have credit exposures at June 2010 that are more or less the same, and in a range from $650 billion to $667 billion. So for "size" these three banks are more or less the same. ANZ's credit exposure is $550 billion but likely to grow more swiftly than that of the other banks as it seeks corporate banking business more assertively in Asia.The measures of credit used here are the "exposure at default" reported by banks in their quarterly updates and differ to a degree from balance sheet data and APRA's monthly banking statistics.The ratio of risk-weighted assets to credit exposures, shown in the second graphic, highlights that Westpac has the loan portfolio needing the least amount of capital. These ratios declined for all banks over the last year, consistent with reduced demand for business credit.