Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
I've always been a bit confused by this myself, as all loans, even long term loans, are always structured around 3-month or 6-month LIBOR (or EURIBOR in the case of euros) - ie the bank borrows the money for 6 months, lends it to the client, and rolls over the portion not repaid by the client 6 months later on the interbank market.

So liquidity is always going to be in 3-month or 6-month money, but I guess that long term funding is about getting commitments by other people to not ask for repayment after 6 months (or automatically rollover the funding) but leaving it in place ofr longer, ideally matching the maturity of the back-to-back loans to the clients.

So money markets may have lent money for 5 years using 6-month instruments, but now are lending only for 6-months, using the same 6-month instrument but with no guarantee of rollover.

But maybe I'm completely wrong on this.

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Sep 15th, 2011 at 09:49:49 AM EST
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