Banks may care to get a wriggle on and develop a more diverse funding profile ahead of the introduction of stiffer regulations on liquidity in 2015, Guy Debelle, assistant governor of the Reserve Bank of Australia, told a Finsia lunch in Adelaide yesterday.Banks need to develop liability products that conform to the 30-day liquidity stress scenario, Debelle said.He also predicted that banks would cut the interest rates they offered on at-call deposits before too long."The incentive for ADIs to issue short-term debt to other financial institutions will be considerably reduced under Basel III," Debelle said, since "funds borrowed with less than 31 days to maturity would need to be invested entirely in liquid assets.""Thus, there will be a marked decline in the provision of such debt by banks. "It is quite probable that new funding instruments will emerge that seek to accommodate the new regulations. In some other jurisdictions, a greater reliance on debt with 31-day notice periods (given the 30-day liquidity stress scenario) has already been observed."Debelle cautioned, though, that "regulators and financial institutions will need to ensure that this does not create a new stress point at 31 days as funding piles up at that maturity."Turning to at-call deposits, Debelle said they were "one product… yet to see the effect of the new liquidity regulation on pricing.""Relative to other types of deposits, these products are very expensive from a liquidity point of view, but they still offer interest rates that are a large spread above the cash rate. "As banks focus on the liquidity costs of such products, I would expect to see these rates decline relative to those on other types of deposits. Indeed, it would be surprising if the re-pricing doesn't occur fairly soon given the liquidity regulations take full effect at the beginning of 2015."Our liaison with banks suggests that these deposits are particularly sensitive to changes in pricing, so there is a big disadvantage in terms of losing deposits to your competitors if you are the first to re-price for the new regulations. "But if an institution has a large reliance on this source of funding, it won't be able to change that reliance overnight on the 31st December 2014. Just like supertankers, funding structures take a long time to change direction, and that change of course needs to be occurring around now."Debelle also used his speech to touch on a subject favoured by senior bank executives: the supposed shortage of funding whenever credit demand rebounds.This concern was "misplaced", he said. "In an environment where the demand for credit has picked up, because the world is a better place, funding conditions for intermediaries are also likely to be much easier."Moreover, from a macro perspective, there is unlikely to be a funding problem for the system as a whole when the world is a happier place, even if an individual institution is not 100 per cent sure where the next funding dollar is coming from."