National Australia Bank will rely on secured funding, including mortgage-backed securities and covered bonds, to achieve short-term funding targets in wholesale markets.NAB made no use of secured funding in 2010 but sold A$4.6 billion in RMBS, including one covered bond sold through Bank of New Zealand, in 2010.Mark Joiner, finance director of NAB, said at the investor briefing that "you can see the importance of secured funding starting to come back. I expect secured to play a more significant role for a while."Like other banks, NAB has placed little wholesale debt in offshore markets in the last three months, as bank treasurers wait for the perennial doubt over European government debt and bank liquidity to resolve.As one response to the unsettled markets, NAB has opted to increase its holding of liquid assets significantly over the last six months.NAB said liquids increased to $95 billion at September from $72 billion at March, "as an additional buffer… being held against market volatility."The bank's effective level of liquid assets may be even higher, since it decided to exclude $21 billion of internal residential RMBS from its liquid asset holdings. This may be because this form of funding may not meet the future test of liquid assets.NAB said it recorded a "net stable funding ratio" of 85 per cent at the end of its financial year, up from 78 per cent a year ago, a ratio that will have to reach 100 per cent by 2018 under present regulatory planning.This ratio might dip, however, over the next year or so, if business lending recovers quickly, NAB's CEO, Cameron Clyne, said.Joiner said that "product ROEs [from business lending] are still very attractive, so you wouldn't turn off product growth."