2  BIS Review 116/2008  and tighter credit markets as the main risk to a modest U.S. recovery next year. Subsequent events have further weakened the U.S. financial sector, making this risk more probable. Global financial turmoil After 14 months of turmoil, global financial markets are at a critical juncture.
Risk aversion across the system has risen to unprecedented levels, and an aggressive deleveraging process is under way. Many foreign financial institutions need to raise significantly more capital at a time when their ongoing earning power appears to have been permanently reduced.