Australian banks are citing the high cost of money caused by the ongoing eurozone debt crisis as they reason why they would not likely follow the Reserve Bank of Australia (RBA) the next time the central bank cuts the overnight cash rate.

On Wednesday, Westpac was the latest Aussie bank to hint that it would no longer pass to customers in full future interest rate reductions to be made by the RBA. It followed a similar pronouncement made earlier by the Australia New Zealand Bank which were pressured to pass in full the 25 basis points interest rate cut made by the Australian central bank last week.

The bank's chief executive Gail Kelly pointed out that many funding markets tapped by major Australian banks had effectively closed.

"And when they open up, our estimation is that the cost of raising money will actually be more than it was at any point during the global financial crisis," Ms Kelly told shareholders at Westpac's yearly meeting.

She explained that banks must have a flexible approach to lending rates for major lenders in the country to retain their AA- ratings.

National Australia Bank (NAB) Chairman Michael Chaney made the same comment in the bank's annual meeting on Thursday.

"The volatile overseas markets and new global banking regulatory requirements have pushed up the cost of funds and the current instability in Europe presents us with additional pressures in the wholesale term funding markets," The Herald Sun quoted Mr Chaney.

He added that the agreement at last week's European Union summit to put in place a closer fiscal union was mainly focused on long-term objectives and failed to provide a clear solution for the long-term.

"We are very mindful of the impacts of interest rate decisions on customers but these must be balanced with what is economically responsible," Ms Kelly said.

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