It is "a fact" that bank funding costs have increased, and banks "have responded in a way that you would expect they would", Glenn Stevens, the governor of the Reserve Bank of Australia, said yesterday.When asked to comment on the merit of analysis produced by credit market research, in conjunction with Societe Generale, questioning banks' claims of an elevated cost of funds, Stevens said: "I think the facts are that the cash rate has come down 50 basis points [but] the cost of [banks'] funding their books hasn't come down quite so much."That's what everyone's aggravated about."So, relative to what we set, they have gone up a bit."Stevens was speaking at the Summer School held by the Australian Securities and Investments Commission in Sydney.The RBA made the same point in the minutes of the monthly monetary policy discussion of the central bank's board earlier this month.The minutes noted the "marked repricing of bank debt globally", the significant rise in spreads paid by banks in January and the sale by Australian banks of "sizeable amounts of covered bonds" at these higher spreads. The minutes continued: "Furthermore, the cost of swapping funds raised in offshore markets into Australian dollars had increased in recent months. There had also been two large issues of covered bonds in the Australian market, which had repriced the local bank debt curve significantly higher."Over the same period, Australian banks continued to compete actively for deposits, which resulted in the reductions in most deposit rates not fully matching the recent reductions in the cash rate."This section of the minutes concluded: "Collectively, these developments had increased banks' overall cost of funding relative to the cash rate and had narrowed the difference between banks' lending rates and funding costs."