The Australian banking industry remains "somewhat more exposed to funding and liquidity risks compared with some other highly-rated systems", credit rating agency Standard & Poor's said yesterday in a report on the 2014 outlook for the Australian banking sector.S&P said that "the recent low-growth environment has been conducive to improving trends" on funding, with "the transition by Australian banks to improved deposit levels, longer-tenor wholesale funding, lesser reliance on short-term funding, expansion into new funding markets and investor pools (such as covered bonds), and pre-funding of wholesale commitments."It said it might "derive further ratings comfort if these positive trends persist in more buoyant times.""A deterioration in funding and liquidity trends or in the performance of individual banks or the peer group as a whole compared with international trends and comparisons could result in negative ratings momentum."On the asset side, S&P said that it "expects above-average asset quality will persist during 2014", while "capitalisation also compares more favourably by international standards, with the Australian banking industry also being highly profitable, by international standards."S&P said credit ratings in the Australian banking sector "have remained strong and extraordinarily stable by global standards in the aftermath of the global financial crisis, which began over five years ago."