Banks are tightening the requirements for investors to take out margin loans on portfolios that are dominated by one or two stocks.

Commonwealth Bank of Australia (CBA) has taken steps to limit the impact of loans on concentrated portfolios.

"We are introducing a new product feature designed to improve the diversification of our clients' portfolios through the building of more robust and diverse secured holdings," CBA head of investment lending Brian Phelps said.

"We will reward clients who diversify beyond five security holdings in their portfolio, with a small increase in loan-to-value ratio (LVR) of 5 per cent. We will penalise clients who maintain portfolios of one or two stocks by reducing their LVRs. We also price such loans to account for risk," Phelps said.

A reduction of the LVR percentage means customers are able to borrow less money to invest in shares, while an increase gives them more room to borrow.

Over the past five years, CBA has already penalised customers with portfolios consisting of a single stock with a 10 per cent lower LVR.

However, Phelps also said concentrated loans formed a small part of the margin lending business and the bank had not sustained any losses as a result of these loans.

Earlier this month, Westpac announced a tripling in write-downs on margin loans, largely due to concentrated portfolios.

The bank said it would not write many of these loans in the future.

National Australia Bank's (NAB) model for calculating how much a client could borrow to invest took into account variations in market volatility and liquidity, NAB head of margin lending Adrian Hanley said.

As a result, the loans the bank approves now are more conservative than before the markets started their rollercoaster ride.

However, NAB's exposure to concentrated portfolios has also changed as a result of clients' actions.

"What we have seen is that clients are quite proactive in managing the positions that they have held. They have restructured their debt from borrowing assets," Hanley said.

Although the banks are becoming stricter in their criteria for margin loans, they expect to expand their activities in this area.

"With the global economic crisis, even more Australians are facing the prospect of not having as much money as they would like for later in life," ANZ head of margin lending Sue Oddie said.

"We believe that margin lending has an important role to play in helping customers reach their financial goals sooner."