Banks may be paying higher interest rates on relatively short-term deposits as a form of insurance against the prospect of a cut in their credit ratings were they to source more funding from wholesale markets, an assistant governor of the Reserve Bank of Australia suggested yesterday. Guy Debelle, assistant governor for financial markets, told an industry conference that in the unsecured bond market "banks continue to keep their stock of term debt relatively constant, that is, issuance is broadly in line with maturities."This strategy is the result of a number of different considerations, including the relatively subdued growth in balance sheets, Debelle said. "But one dominant cause is the desire to maintain a strong rating, with the latent threat of a downgrade if wholesale issuance were to grow 'too large'. "This reflects the somewhat misplaced assessment of 'deposits good; wholesale funding bad'. "As a result, banks are currently paying about the same price for a three-month term deposit as they are for a five-year debt issue."Debelle said later, in response to a question, that the "five-year wholesale funding is much better to meet [liquidity targets] than a three-month TD or a two-month TD.""One rolls off in five years, the other rolls off in three months."The RBA separately noted yesterday (in its monthly board minutes) that "wholesale funding cost pressures on the banks [have], at the margin, eased with the improved global market sentiment."The RBA said that "this would take some time to be reflected in average costs."Debelle was speaking at the KangaNews DCM Summit in Sydney.