Westpac rates policy still evolving

Over the past week the head of ANZ has said interest rate setting must be determined by the market and the head of St George said his bank would follow the lead of the Reserve Bank in setting variable mortgage rates.

Westpac chief executive David Morgan refused to be drawn on the issue. Asked about the bank's rate setting policy he said: "That is sill evolving. We have made no decision to increase variable home loan rates. We will take a decision in the interests of all our stakeholders."

Morgan believes some aspects of the global credit market liquidity tightening are structural. "While we anticipate an easing in the tight liquidity conditions through 2008, some changes brought on by the fall-out of the US sub-prime market will become a more permanent feature of financial markets.

"In particular, we expect more differentiated pricing for risk."

Fifty three per cent of the bank's funding comes from customer deposits, 23 per cent from short-term wholesale funding, 18 per cent from long-term wholesale funding and three per cent from securitisation. The bank raised $8.5 billion of term funding in September.