The banking regulator beat the drum once more on the need for banks to lift their percentage of long-term funding on Friday, with APRA chair John Laker using a speech to remind banks they must do so. Or at least they must show they have made every effort to do so before they will be given access to the liquidity facility the Reserve Bank of Australia will make available from the beginning of 2015.Short-term, wholesale funding has declined by about a third to around 20 per cent of industry funding over the last four years and bank regulators continue to suggest it will have to decline further as banks reshape their funding to meet new rules.Laker told a business lunch that: "Increasingly, boards are asking 'Do we want to rely on short-term funding markets to fund loan growth at all?'"The Australian Prudential Regulation Authority chair raised the issue in the context of "balance sheet resilience and… and how [a bank] views liquidity and funding risk."Banks and other deposit-taking institutions will, Laker said, "need to demonstrate to us that they have taken all reasonable steps towards meeting their [liquidity] requirements through their own balance sheet management, before relying on the facility [from the RBA]."This facility will be a backstop rather than actual funding. The fee will be 15 basis points of the committed funding once it comes into play.Laker also used the speech, to the American Chamber of Commerce, in Melbourne, to walk through a list of other prominent topics in banking supervision.A second major theme was outsourcing and offshoring.Laker said APRA now required boards of banks to "define their risk appetite around outsourcing and offshoring, just as they define a risk appetite for credit or market risk."This task, he said, was "often a new and difficult task for ADI boards and management."Laker also said banks needed to put in place arrangements "to ensure that ADIs can disentangle arrangements and provide seamless continuity of service to customers in the event of problems with an outsourced service provider."Other topics touched on by Laker include a "targeted review", undertaken in conjunction with each bank's external auditors, of the loan serviceability score-cards used in housing lending.One feature of this review is the extent of "over-rides" to these score-cards.Laker also highlighted the rising incidence of new home loans at loan-to-valuation ratios of more than 90 per cent over the last year, though he did not say how common these were.He said that APRA's work on credit risk has shifted over the last year from business lending to housing lending.He said that while "housing lending has been a sound asset class for a long period… the non-performing loan ratio of around 0.7 per cent, although low by international standards, is well above its level prior to the crisis."Laker also cautioned banks on cutting staff that work in the field of risk management."Cutbacks to risk management staffing because they seem an easy cost centre target, not because the ADI has reined in its risk appetite or exited