Economic and financial developments after the collapse of Lehman Brothers  The global financial markets changed drastically after the collapse of Lehman Brothers in September 2008. Market participants became increasingly cautious about taking counterparty risk, causing trading volume to decrease sharply and market liquidity to decline significantly. Credit spreads widened and the prices of financial products, including securitized products, plunged.
Consequently, financial institutions experienced business difficulties or failed one after another in many countries, thereby aggravating financial system concern. Credit provisions from financial institutions to firms and households declined markedly, leading to a global credit contraction. Confidence, which is the most crucial element in the financial system and markets to function smoothly, was virtually lost.