The resumption of activity in the securitisation market over the past couple of weeks does not mean that it is back to business as usual in the Australian financial services industry, Moody's Investors Service said yesterday.Moody's issued a report on the progress of Australian and New Zealand banks through the sub-prime debt crisis, saying it had maintained its stable ratings outlook on the Australian banks.But it warned that lenders that were heavily dependent on securitisation as a funding source faced the prospect of paying a high price for scarce funds for the medium term.According to Moody's the financial institution with the biggest percentage of funding coming from securitised assets was AMP Banking, with 63 per cent. Asset securitisation makes up 47 per cent of Heritage Building Society's funding and 45 per cent of Adelaide Bank's.Securitisation accounts for 22 per cent of Bank of Queensland's funding, 20 per cent of Macquarie bank's, 18 per cent of St George Bank's and 16 per cent of Suncorp's.Moody's senior vice president Patrick Winsbury said those financial institutions with around 20 per cent of their funding coming from securitisation had sufficient flexibility to "pull other levers" without any negative impact on earnings.Winsbury said: "But 40 to 50 per cent is the level at which we should be taking a more conservative position on the rating."Winsbury said issuance of mortgage backed securities had picked up over the past couple of weeks but the amounts were very small. Last week Challenger priced a $297 million RMBS issue. The week before Rams priced a $300 million issue, Liberty priced a commercial mortgage backed securities transaction and Calibre launched a $200 million issue. Late in September Puma priced a $500 million deal."We don't have a clear picture from those recent deals of what the appetite for Australian RMBS is going to be in the medium term. The big question is who was buying when big issues were getting away last year and in the first half of this year."We have seen estimates that hedge funds and SIVs (special investment vehicles) accounted for 25 to 50 per cent of the buying. The figure is going to vary by financial institution and by time period."The issue is that those some of those highly leveraged investors will not be coming back."Winsbury said there was some mis-informed commentary about pricing. "You hear people say the wider spreads are not such a problem because they are only taking the market back where it was five or six years ago. "What they don't recognise is how much the loan products have changed in that time. There has been a lot more competition in the mortgage market during that time and margins are thinner."The 10 or 20 basis point increases in prime full-doc rates that we have seen so far do not reflect the extent of the increased cost of funding. Lenders are making strategic decisions to absorb costs but if it continues in the medium term we might see some lenders cut out of some