Regulatory change in areas such as price signalling, credit card over-limit fees and mortgage exit fees will do little to change the competitive environment in the banking industry, a senior competition lawyer said yesterday.Allen & Overy partner Dave Poddar said the real issue was funding. "Price signalling and fees don't really matter much compared with funding. The Government has built up false expectations about some of these things," he said.Speaking at yesterday's Australian Mortgage Conference, held in Sydney, Poddar said: "The focus should be on coming up with smarter ways of funding. That may be through covered bond or different bond structures, or access to Asian deposit markets."KPMG's national partner in charge of financial services, Michelle Hinchliffe, agreed that the competition issues being addressed by the Government would not lead to fundamental change. "Nothing they are doing will lead to the creation of a fifth pillar," she said."What we can say is that funding costs will go up." Hinchliffe said the spread of the average variable mortgage rate has gone up from 180 basis points in 2006 to 290 basis points today.The spread on the small business overdraft rate has gone up from four to more than six per cent over the same period."But what we see is that the average bank interest margin is lower today than it was in 2006. Funding costs have had an impact," Hinchliffe said. "Changes to the liquidity rules will impact those costs further, because we will see banks competing to hold a fairly narrow range of assets."The development of the covered bond market will make a difference but the impact will be limited. "Banks will look to tap into Asian economies with high savings rates."She said she could not see any major structural changes coming out of the reform process. There would be access to funds, but these would be expensive, and financial institutions would have to adjust to lower margins.