In a surprise move, Moody's last night placed the ratings of all the four major banks on review for a possible downgrade, saying the scale of wholesale funding is too high to justify the current rating.Also on review is the baseline credit assessment of Aa3 for the banks.The rating on the long term, senior unsecured debt currently stands at Aa1 and could be downgraded by no more than two notches, as Moody's has indicated the rating will remain within the Aa category after the review.Moody's has also put the ratings of the four major banks in New Zealand on review as a direct consequence of the review of their Australian parent banks. Their long-term debt rating currently stands at Aa2 and Moody's hasn't indicated if the rating will remain within the Aa category post-review.The ratings agency has noted that market funds comprise on average 43 per cent of total liabilities for the major banks in Australia and about 40 per cent for New Zealand banks. While Moody's believes growth in such funding is likely to be restrained in the near-term it is still unusual compared with global peers at a similar standalone rating level.As such funds are very sensitive to shifts in investor confidence Moody's believes a review of the major banks is warranted.The review will mainly weigh the risks from the funding profiles against the improvement in financial flexibility over the course of the crisis. The positives among these are the increase in the average tenor of wholesale funding, a key theme of banks' funding strategies since the credit crunch of 2007 morphed into the financial crisis of 2008.The review won't affect the Aaa rating on government guaranteed debt and the Aaa rating issued earlier this week on Westpac's first RMBS since December 2009.Moody's has affirmed the short term Prime-1 ratings of both the Australian and New Zealand banks.In the case of New Zealand, the review also includes the junior subordinated debt rating of A1 in the case of ANZ National; preferred stocks ratings of A3 for ASB Capital and BNZ Income Securities, and Westpac Trust Securities' Aa1 rating, and Westpac Trust Capital's Aa2 rating.