Credit crunch – phase two

During the three months to end-January the development of the credit crunch went through two phases. A sustained period of extreme distress in the money markets - the liquidity phase - was followed by growing concerns with the capital position of banks and other financial institutions - the solvency phase. Meanwhile, the global economic outlook deteriorated.

Cooperation on tensions...

Against a background of severe stress in interbank markets, five of the world's leading central banks announced