High levels of such funding increase the probability of severe funding problems at, and thus the failure of, major financial firms.
They also complicate the orderly resolution of major financial firms in the event of failure.12 Indeed, precisely because an effective orderly resolution mechanism provides for continued funding of certain short-term creditors to staunch potentially calamitous runs, that type of funding will not be subject to the increased market discipline resulting from the creation of a credible resolution process.