Westpac New Zealand has to arrange for NZ$3 billion of intra-group funding by the end of the 2011 calendar year - the deadline for the transfer of loans and deposits from the branch to its New Zealand subsidiary.The transfer follows a detailed review of Westpac's operations in New Zealand, after it was found to be in breach of a key Reserve Bank of New Zealand conditions of registration, in 2008.Long-term funding is required because, once transferred, the increase in the loan book will be subject to the RBNZ's core funding ratio from which the branch is currently exempt. As of December 2010, Westpac says around NZ$6.8 billion of loans and NZ$5.5 billion of customer deposits will be transferred.While the deposit amount is sizeable, the majority is in very short-term deposits and thus their contribution towards the core funding ratio will be small. As of September 2010, nearly 70 per cent of the deposits were for a term of less than a month.When the funding amount was agreed upon, Westpac had a slightly larger loan book, which has fallen off following the financial crisis. On the other hand, deposits have continued to grow, thus making the NZ$3 billion look far greater than the difference between loans and deposits.Westpac's chief financial officer, Richard Jamieson, says the bank will be well-placed to meet the core funding ratio because it has been working towards lengthening the duration of its funding."We are extremely conservatively placed in WINZL and intentionally so," Jamieson said.One source of long-term funding could be the covered bond issuance of around EUR1 billion that Westpac had planned for the second half of February but which has now been postponed.Jamieson indicated Westpac was taking a wait-and-watch approach as it is concerned about the instability of the markets, because of tensions in the Middle East. Also weighing on sentiment is the rating review indicating a possible downgrade announced by Moody's last week. But Westpac found some consolation there, as market reaction to a possible downgrade has been muted so far.