The financial regulator plans to help Australian banks cut their reliance on the "kindness of strangers" for their funding through an overhaul of the nation's securitisation markets.
In a move that could also support competition in home lending, the Australian Prudential Regulation Authority on Monday flagged changes to bolster the market for lower-risk securitised assets.
Securitisation refers to the practice of selling bundles of assets, such as mortgages, to investors.
In the United States it played a key role spreading sub-prime debt before the 2008 global financial crisis. But Australia's sector has posted relatively low default rates and regulators see it as a valuable alternative to volatile short-term money markets.
APRA's executive general manager Charles Littrell said the regulator was developing a new framework that would reduce constraints to investing in securitised assets that were "obviously safe". At the same time it will introduce "substantial disincentives" to investing in riskier assets.