A rating review of the Big Four banks for a possible downgrade by Moody's may have seemed like a late reaction from the ratings agency, but Moody's argues the action is justified when one takes a longer-term view."If Moody's is taking a longer-term view of, say, five years the same structural sensitivities remain," said Patrick Winsbury, senior vice-president, financial institutions group, at Moody's. Winsbury was referring to the banks' continued reliance on wholesale funding. One of the main triggers to act now is the fact that banks no longer have the benefit of a government guarantee over wholesale debt, which provided support through the global financial crisis, Winsbury told Banking Day.Wholesale funds comprise, on average, 43 per cent of total liabilities of a major bank in Australia. And, while Moody's acknowledges there has been a decline in the percentage of wholesale funding, in dollar terms, this funding has only increased over the period of the GFC.Bank for International Settlements' data shows Australian banks' net offshore liabilities increased to US$381 billion in September 2010, from US$344 billion in June. This is sharply higher than the US$254 billion in December 2008."The Australian banks' net offshore liabilities are second only to the US banks," said Winsbury.To make his point, Winsbury cited an example of the portfolio allocation of an offshore fund manager. "If one asks an offshore fund manager, there's often now a bigger proportional exposure to the Australian financial sector than a few years back."In short, there are "sensitivities now that were not there last year", he said.Moody's also takes note of the fact that banks now face a range of earnings pressures as they move forward. While this won't have a direct impact on ratings, it will be made note of during the review. Add to this high consumer leverage and high asset prices, and the picture doesn't look so rosy.However, above all, "Australia hasn't been tested by the kind of downturn seen elsewhere," said Winsbury.On the positive side, banks have a lot of flexibility, which has been demonstrated by their tapping into the pool of superannuation savings. And, they will, in future, have the ability to issue covered bonds. This will ensure that even after a downgrade their long-term rating will remain within the Aa category.