The exposure to the sub-prime market became all the more pervasive, with banks and hedge funds in the US, UK, and Australia, to name a few, indicating exposure to this market. The global nature of the problem was particularly highlighted when the second largest bank in the Eurozone froze access to certain of its investment funds on 09 August 2007.
Risk aversion increased over this period, as clearly witnessed in the almost 200 basis points drop in the US three-month Treasury Bill yield in early August. Banks began to hoard cash to cover their funding needs and as interbank liquidity dried up, banks found it difficult to raise term funding.