Bankers attending yesterday's Global Financial Stability Conference in Sydney would have been left scratching their heads about what they need to do improve the stability of their funding. Central bankers raised questions about the efficacy of two popular approaches - increasing household deposits and lengthening the term of wholesale funding.Reserve Bank of Australia deputy governor Philip Lowe said it was common today for household deposits to be seen as "good and stable".Lowe said: "Many financial institutions have had an explicit objective of increasing the share of liabilities that are accounted for by deposits. Consequently, they have been prepared to pay large premiums for liabilities that are called deposits, relative to wholesale funding liabilities of similar maturity."Lowe said he agreed that the shift towards deposits was helpful in achieving financial stability, but he warned that banks had to find the right balance.He said: "The Cypriot banks were very heavily deposit funded. This turned out to have two distinct disadvantages"The first was that when the value of the banks' assets fell, depositors had to bear the brunt of losses, after equity holders. This significantly complicated the resolution of the banks' problems."He said some regulators were now calling for deposit-funded banks to be less reliant on deposits."The second disadvantage is that with only limited wholesale liabilities the Cypriot banks were arguably subject to less market scrutiny than were banks with a different funding structure. One benefit of wholesale funding is that the issuing bank needs to keep turning up to the market and selling its story to sophisticated investors."Speaking at the same conference, which was organised by the Institute of Global Finance, which is part of the Australian School of Business at the University of New South Wales, the director of research at the Federal Reserve of New York, Jamie McAndrews, raised questions about long-term wholesale funding.McAndrews said an increase in reliance on long-term debt may not increase stability. Long-term funding is more costly than other forms of funding and, therefore, needs assets of higher value of support it.McAndrews said banks were improving the liquidity of their assets by holding more cash. "If you have long-term debt and lots of cash, it is very expensive," he said.Offsetting this, he said, is the fact that a bank is better protected against a run of withdrawals in a crisis."Higher long-term debt holdings have ambiguous implications for stability," he said.