Global financial markets  Recent developments While the trigger for the global developments in the financial markets during the recent past was the rising default rates on sub-prime mortgages in the US, the source of the problem was perhaps not the macro-global imbalances but significant mispricing of risks in the financial system.
Easy monetary policy in major financial centres, globalisation of liquidity flows, wide-spread use of highly complex structured debt instruments and the inadequacy of banking supervision in coping with financial innovations, contributed to the severity of the crisis.