Small business borrowers have borne yet more pain from banks' management of their margins over the last year, while big business and residential borrowers have benefited from price competition, a new analysis published yesterday by the Reserve Bank of Australia shows.In an overview of trends in banks' funding costs, published in its quarterly Bulletin, the RBA concluded that "lending rates have tended to move in line with funding costs over the past 12 months."The analysis undermines one media meme of 2013, namely that banks have the scope to cut lending rates and should do so.According to the RBA, since mid-2011 "the major banks' funding costs are estimated to have moved broadly in line with changes in the cash rate. "Since then, however, increases in the cost of deposit funding and the level of compensation demanded by investors to hold bank debt, particularly in the first half of 2012, has seen estimated funding costs rise by a further 40 to 50 basis points relative to the cash rate. "More recently, overall funding costs have been broadly unchanged, deposit rate spreads have been broadly constant, and the recent decline in long-term wholesale debt spreads have, to date, had little effect on outstanding funding costs."The RBA said that since the onset of the global financial crisis "the spread between lending rates and the cash rate has increased for all loan types.""This has predominantly reflected an increase in debt funding costs. The variation in lending rates across different loan types reflects a reassessment of the relative riskiness of those loans."The RBA said that during 2012 the average interest rate on outstanding variable-rate housing loans increased by about 40 basis points relative to the cash rate. It said: "This increase is consistent with the overall increase in banks' funding costs, suggesting that risk margins were largely unchanged.""By contrast, the average interest rate on new variable-rate housing loans increased by around 35 basis points relative to the cash rate, reflecting a small increase in the average size of discounts offered by banks to new customers, as competition for mortgage lending remained strong throughout the year."The RBA said that since 2009 interest rates on both small and large business bill facilities had fluctuated within a tight range. "However, after peaking in September 2011, the spread on outstanding variable-rate large business facilities has decreased, whereas spreads on other outstanding business lending have been gradually trending higher. "By contrast, spreads on small business variable-rate lending increased in the first half of 2012."