When Westpac priced a US$3 billion term funding issue this week its pricing was 40 basis points better than the price it paid for an issue only a few weeks earlier. But the issue cost 45 basis points more than a raising in September 2009 and it was 120 basis points higher than the cost of term funding in 2006.Westpac chief financial officer, Phil Coffey, said pricing shifts in credit markets have been significant this year.Coffey said: "These shifts are more important to our funding costs than changes in the cash rate. Central don't have the same control over the cost of credit that they once did."Policy is still effective but it will be influenced by a broader range of factors."He said retail funding costs were also high and new liquidity rules would mean that banks continued to seek higher levels of deposits. "Average term deposit rates in 2010 are 140 basis points higher than the cash rate. Before the GFC term deposit rates were 60 basis points below the cash rate."Coffey said the Australian bank funding model needed some adjustment. Institutional investors still had an appetite for Australian bank credit but there could be constraints caused by concentration risk. To expand the investor universe the banks would have to tap the savings pools in developing economies and they would have to issue new instruments. He said Treasury could come up with a structure that would allow banks to issue covered bonds without compromising depositors' funds.