Global financial crisis
Background
Starting in the summer of 2007, accumulating losses on US subprime mortgages triggered widespread disruption to the global financial system. Large losses were sustained on complex structured securities. Institutions reduced leverage and increased demand for liquid assets. Many credit markets became illiquid, hindering credit extension.
In less than a year, the balance sheets of financial institutions became burdened by assets that have suffered major declines in value and vanishing market liquidity. Participants are reluctant to transact in these instruments, adding to increased financial and macroeconomic uncertainty.
To re-establish confidence in the soundness of markets and financial institutions, national authorities have taken exceptional steps with a view to facilitating adjustment and dampening the impact on the real economy. These have included monetary and fiscal stimulus, central bank liquidity operations, policies to promote asset market liquidity and actions to resolve problems at specific institutions. Financial institutions have taken steps to rebuild capital and liquidity cushions. And both national and international organisations have developed recommendations and resources aimed at reducing the likelihood that this situation would recur.
During 2010-2011 the crisis morphed into concerns about the sovereign debt of some countries. This resulted in the restructuring of the debt of some nations, and triggered another round of concerns about the solvency and financial reporting practices in relation to institutions holding sovereign debt instruments. It also raised concerns about the accounting practices adopted by governments.
This page on IAS Plus is dedicated to tracking developments arising from the global financial crisis, the policy responses and recommendations and related resources.
