The Australian Prudential Regulation Authority is not satisfied with the funding profile of Australian banks, concerned that too much of their funding is short-term issuance in overseas capital markets.A week after the regulator issued a discussion paper outlining its plans for implementing net stable funding ratio rules, APRA chairman Wayne Byres spelled out his concerns on this issue.Speaking at the Australian Financial Review Banking and Wealth Summit in Sydney yesterday, Byres said: "There is room for improvement in funding profiles. "Overall wholesale funding has declined as deposit funding has increased but to the extent short-term wholesale funding has reduced it has been from domestic, rather than offshore markets."Looking at whether we can do more to build domestic wholesale capacity and generally lengthen tenors will be an important area of attention over the next few years."The net stable funding ratio is one part of the Basel Committee on Banking Supervision's liquidity framework.The other is the liquidity coverage ratio, which requires banks to maintain an adequate level of high-quality liquid assets that can be converted into cash to meet liquidity needs for 30 days. The LCR rules took effect in January last year and the NSFR rule will take effect in January 2018. As with LCR, NSFR will apply to only a small number of large authorised deposit-taking institutions (LCR applies to 15 ADIs).NSFR seeks to ensure that long-term assets are financed with at least a minimum of stable funding. Stable funding is the portion of an ADI's capital and liabilities expected to be a reliable source of funds over a one-year time horizon.Byres said the funding profile of the Australian banking system had changed notably since 2008, with greater emphasis on traditional deposit funding and a corresponding material reduction in short-term wholesale funding.As a proportion of total funding, deposits are now almost 2.5 times short-term wholesale funding, whereas in the pre-crisis period they were almost level.However, the continuing reliance of offshore markets for short-term whole funding meant there was room for improvement."The NSFR will certainly act as a buttress against a reversion to previous weaker funding profiles," Byres said.