According to Australian Prudential Regulation Authority requirements, what is the maximum annual growth percentage for a bank's residential investment mortgage lending?

The choice of 10% as the maximum annual growth percentage for a bank's residential investment mortgage lending is aligned with the Australian Prudential Regulation Authority's (APRA) regulatory framework aimed at promoting stability and managing risks within the banking sector. APRA imposes these limits to ensure that banks do not become overly exposed to potential fluctuations in the property market, which can lead to increased loan defaults and financial instability.

Setting the growth cap at 10% reflects an attempt to strike a balance between fostering the growth of the housing market and protecting the financial system from overheating or systemic risks. This growth threshold is also intended to encourage responsible lending practices among financial institutions, ensuring that they maintain prudent lending standards and avoid excessive leverage in this sector.

To ensure comprehensiveness, it's important to note that while other options present higher growth rates, they would likely elevate risk levels in the banking sector, which is contrary to APRA's objectives. Thus, the choice of 10% is vital to maintaining a sustainable housing market and a stable banking environment in Australia.