The Reserve Bank is cautioning the big banks against expanding into Asia too quickly, as the industry looks to capitalise on the enormous wealth being created in the region.
After a four-fold increase in Australian banks' exposure to Asia since 2009, to $112 billion, the central bank said on Wednesday that it expected this trend to continue in the long term as banks looked for new sources of growth.
It said the push into Asia, which has been led by ANZ, could help to expand the big banks' profits, and this could benefit Australia's financial system as a whole.
But, it said "moving into any new market poses a range of risks that banks need to manage carefully".
"These risks would probably be heightened if expansion were overly rapid and not backed by a deliberate and well-founded strategy."
The big banks have a mixed record in overseas expansion.
NAB chief executive Cameron Clyne this month said local banks had "mostly destroyed shareholder value by going overseas", and NAB's business is being weighed down by its push into Britain.
While ANZ and the Commonwealth Bank are bulking up their presence in Asia, Westpac and NAB have opted for a more gradual approach to the region.
The Reserve made the comments in its Financial Stability Review, which said it was not yet clear if the improvement in global market conditions marked the start of an economic recovery.