© Reuters. FILE PHOTO: Two women walk next to the Reserve Bank of Australia headquarters in central Sydney, Australia February 6, 2018. REUTERS/Daniel Munoz/File Photo

SYDNEY (Reuters) – Australia’s central bank said there was a rising risk that the build up of household debt could destabilise the financial system and banks needed to maintain lending discipline amid a hot housing market.

In its semi-annual Financial Stability Review released on Friday, the Reserve Bank of Australia (RBA) said the banking system was generally sound and well capitalised, but there was a danger that “exuberance” in the housing market could see buyers take on too much debt.

Earlier this week, the Australian Prudential (NYSE:PUK) Regulation Authority (APRA), the country’s main banking watchdog, announced a modest tightening of home loan rules in reaction to the debt-fuelled boom in the housing market.