The Australian banking system is among those most exposed to fallout from the euro area, ratings agency Moody's said yesterday.A Moody's report, Assessing the Exposure of Asia Pacific Banks to the Risk of Deterioration in the Euro Area, put Australia, New Zealand, Korea and Vietnam in the "more exposed" category.The report said: "Banking systems in Australia and New Zealand are exposed to high refinancing risks, as well as potential spikes in both borrowing and hedging costs. "The proportion of their external funding in their total funding is 19 per cent for Australia and 16 per cent for New Zealand, which are among the highest in the region and expose banks in both systems to increased funding costs and refinancing risks at times of wholesale funding market stress."Moody's said there were mitigating factors, which included the Australian banking system's ability to pass increased funding costs onto borrowers, the scope of the central bank to ease monetary conditions and Australia's floating currency, which can act as a shock absorber.Overall, Moody's said banks in the region had performed "remarkably well" through more than three years of financial turmoil. However, its view is that the risks have increased.