Fitch Ratings is taking a largely benign view on any adverse shift in the credit cycle for Australian banks, saying that it "does not anticipate a significant increase in impairment charges, with any increases likely to be manageable and absorbed by pre-impairment operating profit."The credit ratings agency said in a report yesterday that it did expect "increasing arrears and impairments in Australia's non-mining business sector because of subdued consumer confidence and a high Australian dollar.""[This year] 2012 is probably the low point for impairment charges in this cycle for many banks," it added.The ratings agency said increasing unemployment "appears to pose the greatest risk to Australian bank asset quality. Household leverage remains high despite some improvement in recent years, leaving households susceptible to weaker economic conditions."Fitch forecasts a rise in the unemployment rate to 5.6 per cent during 2013, a level it said was "likely to produce a moderate increase in impaired asset levels."Fitch said it expected non-performing loans to increase to around 1.6 per cent of all loans in 2013, up from around 1.4 per cent in 2012. The biggest losses would come in the banks' commercial loan books, said Fitch. Consumer lending was largely secured by residential property, and Australian mortgage-holders have high equity.The agency noted that a hard landing for the Chinese economy was the most likely trigger for an Australian economic slowdown and rising impairments. But it noted that even in this scenario, a falling Australian dollar would provide affected industries with some protection.Fitch's report largely echoes a similarly positive report from Moody's Investors Service earlier this month.Separately yesterday, Nobel Prize-winning economist Robert Engle said a well-capitalised banking sector meant that "things look pretty rosy from Australia's point of view," Fairfax newspapers reported.Engle, joint winner of the 2003 economics Nobel for his work on financial markets volatility, said banking systems in China, Japan, the US and France were much larger sources of risk.At the same conference, Reserve Bank of Australia governor Guy Debelle said Australia's banking system had improved its ability to deal with global contagion over the past five years."The banking system was actually reasonably resilient in 2008 and it is a lot more resilient now," the Australian Financial Review reported him as saying.