We are now more than 18 months into the global credit crunch and the fundamental problems remain with us. Commercial banks, unable to assess each other’s exposure to, and the open market value of, debt instruments secured on falling house prices, have withdrawn from the credit markets. In September 2008, the credit crunch increased in severity as the collapse of Lehman Bros raised concerns about bank counterparty risk and the adequacy of bank capital.

The credit crunch also began to have a tangible impact on other financial markets and the wider economy. Equity markets accelerated their implosion as they priced in the negative impact of an economic downturn on corporate profitability. The United States, euro zone countries, the United Kingdom and Japan fell into recession. And as the New Year was ringing, markets were further hit by the exposure of one of the largest financial mar