The business models of some non-bank lenders may not be sustainable, Westpac chief executive David Morgan said yesterday.In a briefing to analysts Morgan said the liquidity crisis may be more than a cyclical event. "Some of it is structural. Non-banks rely on the US commercial paper market and the securitisation market for funding. There are some parts of the change in credit market conditions that are going to be long-lasting. That raises questions about those business models."Morgan said Westpac faced higher funding costs, like all financial institutions, but it had yet to form a view on whether the net effect of the liquidity crisis would be positive or negative.On the positive side the bank has the opportunity to re-price for risk. It is getting more inquiries from corporate clients who no longer have access to alternative funding arrangements. Volatility is creating trading opportunities for the currency and interest rate teams in the investment banking division, who are putting hedges in place for clients. On the negative side the cost of funds is higher and demand for credit may fall.Morgan said the bank had no immediate plans to increase home loan rates outside the RBA cycle. Morgan said Westpac had maintained a risk-averse position. Most of its exposures were in Australia and New Zealand and it had no appetite for "exotics".  The bank's funding base is "very diverse" and well positioned for the medium term."We have no direct exposure to US sub-prime mortgages and no CDOs backed by US sub-prime mortgages. "We have a small portfolio of CDOs, all backed by corporate assets, that has been in runoff since 2002. We have no mark to market issues with that portfolio."We have some exposure to hedge funds and fund of hedge funds. Exposure to hedge funds is via our financial markets business, largely foreign exchange and interest rate swap products, which are fully collateralised. We have exposure to diversified funds that invest in hedge funds."We have one commercial paper conduit in operation, Waratah Receivables Corporation, with $6 billion outstanding. The paper is supported by customers' assets."Waratah still has access to market. It has drawn about 15 per cent from its backup liquidity facility. Westpac has the capital and liquidity capacity should current conditions continue. The impact on ACE capital would be 12 per cent."On the general outlook for the bank, Morgan said the second half of the financial year, which ends in three weeks, was a continuation of trends in the first half, when the bank reported growth in loans and deposits at or above system, and a strong performance from wealth management.