Like the fi rst global fi nancial crisis in the twenty-fi rst century, the current fi nancial and economic crisis has illustrated the adverse impact of reliance on short-term borrowing on the real economy, even in developed
countries. For example, Northern Rock, a large British bank, relied signifi cantly on short-term borrowing from the money market to fi nance its long-term mortgage lending business. Following the U.S. subprime mortgage crisis, liquidity problems at the bank have recently triggered the fi rst bank run in the United Kingdom in more than a century. Th e bank was eventually nationalized in February 2008. Another example of the adverse consequences of short-term borrowing is the current banking and economic crisis in Iceland. In autumn 2008, three large Icelandic banks, i.e., Glitnir, Kaupthing, and Landsbanki, were nationalized. Th ese banks were among the casualties of the global crisis, as their short-term funding from abroad evaporated due to the extreme fear in markets following the collapse of Lehman Brothers.