2 Prior to the crisis, banks outside the United States – mostly in Europe – built up large US dollar asset positions which were funded in part by rolling short-term US dollar borrowing. There was a large maturity mismatch between their short-term funding and their long-term asset positions.
In the second half of 2007, the supply of US dollars in the money markets tightened considerably and these banks found it increasingly difficult to borrow the US dollars they needed directly. Nor could they sell the assets because of their illiquidity.