New Zealand's banks are relatively well placed to cope with a financial meltdown in Europe, an expert says, but their outlook is not entirely risk free and higher interest rates could result for home owners.

A catastrophic default by Greece became more likely this week after the country's Prime Minister, George Papandreou, made the shock announcement that a deeply unpopular bailout package for the country's debt-laden economy will be put to a public vote early next month.

David Tripe, of Massey University's Centre for Banking Studies, said local banks were in a better position to withstand a meltdown than when the global financial crisis hit in 2008.

"If you go back to 2008 [the banks] had been in a habit of getting money for three months, and that was going down to one week, or sometimes one day," Tripe said. He said banks were now sourcing funding with longer maturities.

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The Reserve Bank's core funding ratio (CFR), which was introduced last year and requires lenders to focus more on retail and wholesale term funding and place less reliance on short-term wholesale funding, much of which came from overseas, had lowered the risks facing banks, Tripe added.

But he said New Zealand banks still sourced about 35 per cent of their funding overseas and the "real concern" was the danger of a European financial meltdown making investors more reluctant to invest in international markets.

BNZ treasurer Tim Main said the bank raised around $8 billion, or 13 per cent, of its funding liabilities in Europe.

It pre-funded much of its requirements, he said, which reduced its reliance on any single source of funding for an extended period.

BNZ had also been focusing on using domestic deposits to raise a larger proportion of its capital, as well as developing new funding streams such as covered bonds.

"Despite our actions, it does appear that the cost of raising money is increasing further, and that a prolonged period of European dislocation will place further upward pressure on all money raised," he said. "This may see pressure for lending rates to increase further."

Westpac chief economist Dominick Stephens said this week that international funding had already become costlier as a result of concerns about European banks.

International markets had been slowing over the past three months, but the situation had not yet caused problems for New Zealand banks because they had been able to delay going into the market to raise funding, Tripe said.

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"They're not going to be able to do that indefinitely."

Tripe said that even if a European financial meltdown occurred, it was unlikely that funding markets would completely freeze up.

"It's just the price would be rather higher and the terms ... would be rather shorter."

NZIER principal economist Shamubeel Eaqub said this country's banks were not overly reliant on short-term funding from Europe.

"That's helpful, but at the same time we do use European money markets to raise money, and because New Zealand is a low savings country we always need to rely on foreign savings so that vulnerability is there and if [the crisis] escalates then there will obviously be issues."

ASB general manager of treasury, Nigel Annett, said the bank was well capitalised and did not have exposure to European corporates or governments.

ANZ New Zealand chief executive David Hisco said the bank, which reported a more than $1 billion full-year profit yesterday, had very little exposure to Europe.