A bias toward secured funding such as covered bonds will persist through 2012 for many of the world's banks, as managers and authorities deal with the twin challenges of sovereign and bank solvency in Europe.A briefing by the Bank of England on Friday, held in connection with the release of its Financial Stability Report, surveyed many of the issues that bedevil the funding plans of major European banks. Many of these are applicable to a number of other banks, including those in Australia.The UK central bank also urged banks in its jurisdiction (dominated by Lloyds, Royal Bank of Scotland, Barclays and HSBC) to raise more capital. But the regulators did not specify how much more capital the big banks needed to raise.Mervyn King, governor of the BoE, said: "I don't think you can say how much capital is required. How much capital does a bank need in order to have the confidence of people prepared to fund the bank, [to] lend to it for several years so the bank can then lend money on to businesses and households? "We know the answer to that question before the crisis hit, which was hardly any at all, because banks were able to get funding with leverage ratios of over 50:1..."Now the leverage ratios are way down, on average around 20:1 [in Britain] and yet banks are having difficulty attracting funding."And that's because those who fund banks have come to realise that banks may be a lot more fragile, or their balance sheets a great deal riskier than they used to think.  "And it does depend on the willingness and confidence of those providing funds to banks, people in pension funds, fund managers, from right around the world, funding banks.  And there is no simple answer to the question of how much capital does a bank need to retain their confidence."I think what's made things particularly difficult is that the interconnectedness between major banks around the world means that problems in one area, such as the euro area, transmit themselves to uncertainty about the balance sheets of major banks around the world, and hence to raising the funding costs there."A few weeks ago King noted that the European Banking Authority had concluded that UK banks, unusually in Europe, did not need extra capital."What we're trying to do is to say: where there are opportunities to increase capital and liquidity, take them."Asked to explain the bilateral liquidity swaps in six currencies announced by the BoE, the European Central Bank, the US Federal Reserve and three other central banks last week, King said: "It was not designed to deal with specific problems, nor was it designed merely to give a gesture.  It was designed to deal with clear evidence that there were problems in banks around the world finding difficulty in accessing dollar funding in particular.  "But we decided that we wanted to take the opportunity of putting in place a general network of swap agreements which would demonstrate that, if this problem were to be