Long/short borrowing/lending

Banks borrow large amounts of money for very short periods even just overnight. They tend to lend it for periods of months or years. Hence long and short.

Banks have average liabilities that mature much faster then their interest producing assets. The most significant short term liability is the demand deposit (in essence a ~0% loan that matures at a near infinite clip.

The implication of these practices (coupled with interested demands) means banks are inherently problematic.

A simple example is a bank takes in deposits in the form of savings accounts but then make mortgage agreement for 25 years. The savings can be pulled out over night while the mortgage is in theory a commitment for 25 years.

Thanks a lot for the replies. I was puzzled because I thought that 'long' and 'short' were being used in the financial sense (as in being long or short on an asset).

Marco