A Reserve Bank official has poured cold water on the notion of setting caps on loan-to-valuation ratios and other "new and untried" tools for managing the credit cycle.Luci Ellis, head of the financial stability department at the RBA, was canvassing issues around "macroprudential" policy, a fashionable topic in banking regulation in recent years.Ellis used the talk to explain the RBA's, and also APRA's, approach to the use of macroprudential policy in Australia."We see 'macroprudential' policy as being subsumed within the broader policy framework for promoting financial stability," Ellis said. "That seems to be something of a minority view internationally."Ellis said that "a lot of bank supervisors are discovering that [new policy tools] are really macroprudential and have been all along."For this reason, I would caution against efforts to invent too many 'new' and untried tools, particularly ones designed to be manipulated over the cycle, much like monetary policy."Ellis said that "one such tool we've been hearing about from other jurisdictions lately is to set a cap on loan-to-valuation ratios for mortgages, and then vary that cap from time to time.""Obviously, it is prudent to have some sort of limit to the leverage in collateralised loans such as mortgages… The question is whether policy-makers should go further and set maximum ratios well below 100 per cent, and whether that maximum should be varied periodically."Ellis said Australia's prudential framework already applied higher risk weights on high LVR loans, such as those without insurance.She also argued that LVR caps would tend to revive the practice of asset lending, rather than making loans on the basis of a borrower's ability to repay from his or her income.Credit law reform in Australia emphasises this principle.Ellis was speaking at annual conference of the Paul Woolley Centre for Capital Market Dysfunctionality in Sydney.