Westpac revealed yesterday that the net impact of higher funding costs in the first half of the financial year was $85 million before offsets.In a briefing paper published yesterday, detailing the impact on the bank of the liquidity crisis in the credit market, the bank reported that the spread of the cash rate to 90 day bills had increased by 20 to 30 basis points.The cost of term funding, taking a blend across the term maturity curve, had increased by an average of 35 to 40 basis points.Costs were being offset to some extent by higher business volumes, increased trading activity resulting from market volatility, and re-pricing of loans.Westpac said it had a diversified and well structured funding program. Fifty-three per cent of its funding comes from customer deposits, 26 per cent from short-term wholesale funding, 18 per cent from long-term wholesale funding and three per cent from securitisation.Forty=two per cent of wholesale funding comes from local investors and the balance from offshore. It has 11 separate established funding programs.All the banks contacted by The Sheet said they were continuing to issue into the credit markets on a fairly normal basis. They denied suggestions that they have stayed out of markets in the hope that pricing would come back down."Our balance sheets are growing and we have to fund that," said one banker.On the question of pricing, the consensus was that the widening of spreads appeared to have levelled off, but that things were still volatile."We used to argue with investors over half a basis point. Now we argue over five," said an executive in the treasury department of a big bank.In September 2006 National Australia Bank established a funding program, issuing $700 million of ASX-listed floating rate notes with a maturity in 2009. Pricing on that deal was nine basis points over the bank bill swap rate. Last week the bank tapped that program with two new issues - one for $300 million and the other $100 million. The spread on those issues was more than 40 basis points.What is encouraging from the bank's point of view is that pricing has remained stable since late last year. In November NAB issued three=year paper at 40 basis points over bills.On Monday Commonwealth Bank announced a $1.5 billion issue of three year senior unsecured notes  half of them fixed rate and half floating.The floating rate tranche was priced at 47 basis points over the bank bill swap rate.  Like the NAB issue the CBA issue went to domestic investors. Bankers agree that they are getting a better price locally and would probably pay more if they made similar issues offshore.In their caution, investors have become insular. They are offering support to local financial institutions but are suspicious of foreign banks.The bankers agree that things are not getting any worse but they are not getting any better either. And ongoing volatility means that pricing will jump about on any given day.Asked if the re-pricing of home loans and other products to reflect