Page last updated at 08:54 GMT, Friday, 7 August 2009 09:54 UK

Timeline: Credit crunch to downturn

Lehman Brothers world headquarters is shown in New York
Lehman Brothers was the first major bank to collapse in the credit crisis.

The full story...

Two years ago, few people had heard of the term credit crunch, but the phrase has now entered dictionaries.

Defined as "a severe shortage of money or credit", the start of the phenomenon has been pinpointed as 9 August 2007 when bad news from French bank BNP Paribas triggered sharp rise in the cost of credit, and made the financial world realise how serious the situation was.

The roots of the credit crunch, however, started earlier.

A quick guide to the origins of the global financial crisis.



Most analysts link the current credit crisis to the sub-prime mortgage business, in which US banks give high-risk loans to people with poor credit histories.
These and other loans, bonds or assets are bundled into portfolios - or Collateralised Debt Obligations (CDOs) - and sold on to investors globally.


Falling house prices and rising interest rates lead to high numbers of people who cannot repay their mortgages. Investors suffer losses, making them reluctant to take on more CDOs. Credit markets freeze as banks are reluctant to lend to each other, not knowing how many bad loans could be on their rivals' books.


The impact of the sub-prime mortgage crisis is quickly shown to have implications beyond the United States. Losses are felt by investment banks as far afield as Australia. Firms cancel sales of bonds worth billions of dollars, citing market conditions.


The US Federal Bank and the European Central Bank tries to bolster the money markets by making funds available for banks to borrow on more favourable terms.
Interest rates are also cut in an effort to encourage lending.


But the short-term help does not solve the liquidity crisis - or availability of cash for banks - as banks remain cautious about lending to each other.
A lack of credit - to banks, companies and individuals - brings with it the threat of recession, job losses, bankruptcies, repossessions and a rise in living costs.


UK bank Northern Rock seeks an emergency loan to stay afloat, prompting a "run" on the bank, as worried customers withdraw 2bn. The bank is later nationalised. In the US, the near-collapse of Bear Stearns leads to a crisis of confidence in the financial sector and the end of investment-only banks.


Seeking a long-term solution, the US government agrees a $700bn bail-out that will buy up Wall Street's bad debts in return for stake in the banks. The US government plans to borrow the money from world financial markets and hopes it can sell the distressed assets back once the housing market has stabilised.


The UK government launches its own bail-out, making 400bn extra capital available to eight of the UK's largest banks and building societies in return for preference shares in them. In return for its investment, the government expects to get a stake in the banks - although exactly how much is not quite clear yet.


Economies around the world are affected by the credit crunch. Governments move to nationalise banks from Iceland to France. Central banks in the US, Canada and some parts of Europe take the unprecedented step of co-ordinating a half-point percent cut in interest rates in an effort to ease the crisis.


Shares have risen and fallen with news of failures, takeovers and bail-outs. In part, this reflects investors' confidence in the banking system. While bank shares have been hammered because of bad debts, retailers have been hit as consumer confidence is shaken by falling house prices and job insecurity.

1 of 10


Between 2004 and 2006 US interest rates rose from 1% to 5.35%, triggering a slowdown in the US housing market.

Homeowners, many of whom could only barely afford their mortgage payments when interest rates were low, began to default on their mortgages.

Default rates on sub-prime loans - high risk loans to clients with poor or no credit histories - rose to record levels.

The impact of these defaults were felt across the financial system as many of the mortgages had been bundled up and sold on to banks and investors.


April 2007

New Century Financial, which specialises in sub-prime mortgages, files for Chapter 11 bankruptcy protection and cuts half of its workforce.

As it sold on many of its debts to other banks, the collapse in the sub-prime market begins to have an impact at banks around the world.


Investment bank Bear Stearns tells investors they will get little, if any, of the money invested in two of its hedge funds after rival banks refuse to help it bail them out.

Federal Reserve chairman Ben Bernanke follows the news with a warning that the US sub-prime crisis could cost up to $100bn (£50bn).


9 August 2007

BNP Paribas sign
BNP's statement is scary, to put it mildly
BBC Business Editor, Robert Peston

Investment bank BNP Paribas tells investors they will not be able to take money out of two of its funds because it cannot value the assets in them, owing to a "complete evaporation of liquidity" in the market.

It is the clearest sign yet that banks are refusing to do business with each other.

The European Central Bank pumps 95bn euros (£63bn) into the banking market to try to improve liquidity . It adds a further 108.7bn euros over the next few days.

The US Federal Reserve, the Bank of Canada and the Bank of Japan also begin to intervene.

17 August

The Fed cuts the rate at which it lends to banks by half of a percentage point to 5.75%, warning the credit crunch could be a risk to economic growth.


4 September

The rate at which banks lend to each other rises to its highest level since December 1998.

The so-called Libor rate is 6.7975%, way above the Bank of England's 5.75% base rate; banks either worry whether other banks will survive, or urgently need the money themselves.

13 September

Northern Rock branch
The fact that it has had to go cap in hand to the Bank is the most tangible sign that the crisis in financial markets is spilling over into businesses that touch most of our lives
Robert Peston, BBC business editor

The BBC reveals Northern Rock has asked for and been granted emergency financial support from the Bank of England, in the latter's role as lender of last resort.

Northern Rock relied heavily on the markets, rather than savers' deposits, to fund its mortgage lending. The onset of the credit crunch has dried up its funding.

A day later depositors withdraw £1bn in what is the biggest run on a British bank for more than a century. They continue to take out their money until the government steps in to guarantee their savings.

18 September

The US Federal Reserve cuts its main interest rate by half a percentage point to 4.75%.

19 September

After previously refusing to inject any funding into the markets, the Bank of England announces that it will auction £10bn.


1 October

Swiss bank UBS is the world's first top-flight bank to announce losses - $3.4bn - from sub-prime related investments.

The chairman and chief executive of the bank step down. Later, banking giant Citigroup unveils a sub-prime related loss of $3.1bn. A fortnight on Citigroup is forced to write down a further $5.9bn. Within six months, its stated losses amount to $40bn.

30 October

Merrill Lynch's chief resigns after the investment bank unveils a $7.9bn exposure to bad debt.


6 December

US President George W Bush outlines plans to help more than a million homeowners facing foreclosure.

The Bank of England cuts interest rates by a quarter of one percentage point to 5.5%.

13 December

The US Federal Reserve co-ordinates an unprecedented action by five leading central banks around the world to offer billions of dollars in loans to banks.

The Bank of England calls it an attempt to "forestall any prospective sharp tightening of credit conditions". The move succeeds in temporarily lowering the rate at which banks lend to each other.

17 December

The central banks continue to make more funding available.

There is a $20bn auction from the US Federal Reserve and, the following day, $500bn from the European Central Bank to help commercial banks over the Christmas period.


19 December

Ratings agency Standard and Poor's downgrades its investment rating of a number of so-called monoline insurers, which specialise in insuring bonds. They guarantee to repay the loans if the issuer goes bust.

There is concern that insurers will not be able to pay out, forcing banks to announce another big round of losses.

9 January 2008

The World Bank predicts that global economic growth will slow in 2008, as the credit crunch hits the richest nations.

21 January

Global stock markets, including London's FTSE 100 index, suffer their biggest falls since 11 September 2001.

22 January

The US Fed cuts rates by three quarters of a percentage point to 3.5% - its biggest cut in 25 years - to try and prevent the economy from slumping into recession.

It is the first emergency cut in rates since 2001. Stock markets around the world recover the previous day's heavy losses.

31 January

A major bond insurer MBIA, announces a loss of $2.3bn - its biggest to date for a three-month period -blaming its exposure to the US sub-prime mortgage crisis.


7 February

US Federal Reserve boss Ben Bernanke adds his voice to concerns about monoline insurers, saying he is closely monitoring developments "given the adverse effects that problems of financial guarantors can have on financial markets and the economy".

The Bank of England cuts interest rates by a quarter of one percent to 5.25%.

10 February

Stockmarket board
Some investors forgot the golden rule of financing: 'Don't buy things that you don't understand'
FSA chief executive Hector Sants, speaking on 27 February

Leaders from the G7 group of industrialised nations say worldwide losses stemming from the collapse of the US sub-prime mortgage market could reach $400bn.

17 February

After considering a number of private sector rescue proposals, including one from Richard Branson's Virgin Group, the government announces that struggling Northern Rock is to be nationalised.

17 March

Wall Street's fifth-largest bank, Bear Stearns, is acquired by larger rival JP Morgan Chase for $240m in a deal backed by $30bn of central bank loans.

A year earlier, Bear Stearns had been worth £18bn.

28 March

Nationwide predicts UK house prices will fall by the end of the year, revising its previous forecast of no change in prices.


2 April

Moneyfacts, which monitors financial products, says 20% of mortgage products have been withdrawn from the UK market in the just seven days.

For sale boards
I have a deep sense of shock at how deeply our successful industry has already been hit by these unprecedented funding market conditions
Steven Crawshaw, chairman of the Council for Mortgage Lenders, speaking on 11 April 2008

Five days later the 100% mortgage disappears when Abbey withdraws the last home loan available without a deposit.

8 April

The International Monetary Fund (IMF), which oversees the global economy, warns that potential losses from the credit crunch could reach $1 trillion and may be even higher.

It says the effects are spreading from sub-prime mortgage assets to other sectors, such as commercial property, consumer credit, and company debt.

10 April

The Bank of England cuts interest rates by a quarter of one percent to 5%.

21 April

The Bank of England announces details of an ambitious £50bn plan designed to help credit-squeezed banks by allowing them to swap potentially risky mortgage debts for secure government bonds.


22 April

Royal Bank of Scotland announces a plan to raise money from its shareholders with a £12bn rights issue - the biggest in UK corporate history.

The firm also announces a write-down of £5.9bn on the value of its investments between April and June - the largest write-off yet for a British bank.

25 April

Persimmon becomes the first UK house builder to announce major cutbacks, citing the lack of affordable mortgages and a fall in consumer confidence.

It adds sales have fallen by a quarter since the beginning of the year.

New homes
Because of the uncertainties in the global economy and the UK lending environment, it is difficult to predict when the [housing] market will improve
House builder Persimmon

30 April

The first annual fall in house prices for 12 years is recorded by Nationwide.

Prices were 1% lower in April compared to a year earlier after a "steep decline" in home buying over the previous six months.

Later in the week, figures from the UK's biggest lender Halifax, show a 0.9% annual fall for April.

22 May

Swiss bank UBS, one of the worst affected by the credit crunch, launches a $15.5bn rights issue to cover some of the $37bn it lost on assets linked to US mortgage debt.

25 June

Barclays announces plans to raise £4.5bn in a share issue to bolster its balance sheet.

The Qatar Investment Authority, the state-owned investment arm of the Gulf state, will invest £1.7bn in the British bank, giving it a 7.7% share in the business. A number of other foreign investors increase their existing holdings.


8 July

The gloomy findings of a survey of its members prompt the British Chambers of Commerce (BCC) to suggest that the UK is facing a serious risk of recession within months.

Meanwhile, the FTSE 100 stock index briefly dips into a "bear market", in which the market suffers a 20% fall from its recent highs.

The outlook is grim and we believe that the correction period is likely to be longer and nastier than expected
British Chambers of Commerce, 18 July 2008

14 July

Financial authorities step in to assist America's two largest lenders, Fannie Mae and Freddie Mac. As owners or guarantors of $5 trillion worth of home loans, they are crucial to the US housing market and authorities agree they could not be allowed to fail.

The previous week, there had been a panic amongst investors that they might collapse, causing their share prices to plummet.

21 July

Just 8% of HBOS investors agree to take up the new shares offered in its £4bn rights issue, because they are priced higher than existing shares are trading on the stock market.

But HBOS still gets the £4bn it wanted, as the unsold new shares are bought by the issue's underwriters.

28 August

Nationwide reveals that UK house prices have fallen by 10.5% in a year.

A day later Bradford and Bingley posts losses of £26.7m for the first half of 2008, blaming surging mortgage arrears for a rise in impairment.

Looking ahead, it warned it expected arrears to remain at high levels for the rest of the year.

30 August

Chancellor Alistair Darling warns that the economy is facing its worst crisis for 60 years in an interview with the Guardian newspaper, saying the current downturn would be more "profound and long-lasting" than most had feared.

2 September

In an effort to kick-start the UK housing market the Treasury announces a one year rise in stamp duty exemption, from £125,000 to £175,000.

5 September

A raft of negative news from around the world sees the FTSE notch up its steepest weekly decline since July 2002.

The US labour market figures, which showed the unemployment rate rising to 6.1%, were a further jolt to investors who have had to swallow a slew of poor economic data in recent days.


7 September

Mortgage lenders Fannie Mae and Freddie Mac - which account for nearly half of the outstanding mortgages in the US - are rescued by the US government in one of the largest bailouts in US history.

Treasury Secretary Henry Paulson says the two firms' debt levels posed a "systemic risk" to financial stability and that, without action, the situation would get worse.

10 September

Wall Street bank Lehman Brothers posts a loss of $3.9bn for the three months to August.

15 September

After days of searching frantically for a buyer, Lehman Brothers files for Chapter 11 bankruptcy protection, becoming the first major bank to collapse since the start of the credit crisis.

Former Federal Reserve chief Alan Greenspan dubs the situation as "probably a once in a century type of event" and warns that other major firms will also go bust.

Meanwhile, another US bank Merrill Lynch, also stung by the credit crunch, agrees to be taken over by Bank of America for $50bn.

16 September

The US Federal Reserve announces an $85bn rescue package for AIG, the country's biggest insurance company, to save it from bankruptcy. AIG gets the loan in return for an 80% stake in the firm.

17 September

Lloyds TSB announces it is to take over Britain's biggest mortgage lender HBOS in a £12bn deal creating a banking giant holding close to one-third of the UK's savings and mortgage market. The deal follows a run on HBOS shares.

25 September

In the largest bank failure yet in the United States, Washington Mutual, the giant mortgage lender, which had assets valued at $307bn, is closed down by regulators and sold to JPMorgan Chase.

28 September

The credit crunch hits Europe's banking sector as the European banking and insurance giant Fortis is partly nationalised to ensure its survival.

In the US, lawmakers announce they have reached a bipartisan agreement on a rescue plan for the American financial system.

The package, to be approved by Congress, allows the Treasury to spend up to $700bn buying bad debts from ailing banks.

It will be the biggest intervention in the markets since the Great Depression of the 1930s.

29 September

In Britain, the mortgage lender Bradford & Bingley is nationalised. The British government takes control of the bank's £50bn mortgages and loans, while its savings operations and branches are sold to Spain's Santander.

The Icelandic government takes control of the country's third-largest bank, Glitnir, after the company faces short-term funding problems.

The US House of Representatives rejects a $700bn rescue plan for the US financial system - sending shockwaves around the world.

It opens up new uncertainties about how banks will deal with their exposure to toxic loans and how credit markets can begin to operate more normally. Wall Street shares plunge, with the Dow Jones index slumping 7% or 770 points, a record one-day point fall.

30 September

Dexia becomes the latest European bank to be bailed out as the deepening credit crisis continues to shake the banking sector.

After all-night talks, the Belgian, French and Luxembourg governments say they will put in 6.4bn euros ($9bn; £5bn) to keep it afloat.

The Irish government says it will guarantee all deposits in the country's main banks for two years .


3 October

The US House of Representatives passes a $700bn (£394bn) government plan to rescue the US financial sector.

The 263-171 vote is the second in a week, following its shock rejection of an earlier version on Monday.

The UK's City watchdog, the Financial Services Authority (FSA) raises the limit of the amount of deposits that are guaranteed should a bank go bust to £50,000.

6 October

Germany announces a 50bn euro ($68bn; £38.7bn) plan to save one of the country's biggest banks

The deal to save Hypo Real Estate, reached with private banks, is worth 15bn euros more than the first rescue attempt, which fell apart a day earlier.

Iceland announces part of a plan to shore up its troubled banking sector. The country's largest banks agree to sell some of their foreign assets.

7 October

The Icelandic government takes control of Landsbanki, the country's second largest bank, which owns Icesave in the UK.

8 October

The UK government announces details of a rescue package for the banking system worth at least £50bn ($88bn).

The government is also offering up to £200bn ($350bn) in short-term lending support.

The US Federal Reserve, European Central Bank (ECB), Bank of England, and the central banks of Canada, Sweden and Switzerland make emergency interest rate cuts of half a percentage point. The Fed cuts its base lending rate to 1.5%, the ECB to 3.75%, and the Bank of England to 4.5%.

11 October

Finance ministers from leading industrialised nations pledge action to tackle the financial crisis. The G7 nations issue a five-point plan of "decisive action" to unfreeze credit markets, after a meeting in Washington.

13 October

The UK government announces plans to pump billions of pounds of taxpayers' money into three UK banks in one of the UK's biggest nationalisations. Royal Bank of Scotland (RBS), Lloyds TSB and HBOS will have a total of £37bn injected into them.

The takeover of troubled US bank Wachovia by Well Fargo is approved by regulators . Banking giant Citigroup had tried to block the move after it launched rival bid.

14 October

The US government unveils a $250bn (£143bn) plan to purchase stakes in a wide variety of banks in an effort to restore confidence in the sector.

President George W Bush says it will help to return stability to the US banking sector and ultimately help preserve free markets.

15 October

Figures for US retail sales in September show a fall of 1.2%, the biggest monthly decline in more than three years, as hard-up consumers avoid the shops.

The figures underscore fears that the wider US economy is now being hit by the financial crisis. The Dow Jones index falls 733 points or 7.87% - its biggest percentage fall since 26 October 1987.

24 October

The UK is on the brink of a recession according to figures released by the Office for National Statistics. The economy shrank for the first time in 16 years between July and September, as economic growth fell by 0.5%.

30 October

The Federal Reserve cuts its key interest rate from 1.5% to 1%.

The Commerce Department issues figures showing the US economy shrank at an annualised rate of 0.3% between July and September.


6 November

The International Monetary Fund (IMF) approves a $16.4bn loan to Ukraine to bolster its economy, shaken by global financial turmoil.

The Bank of England slashes interest rates from 4.5% to 3% - the lowest level since 1955.

The European Central Bank lowers eurozone rates to 3.25% from 3.75%.

9 November

China sets out a two-year $586bn economic stimulus package to help boost the economy by investing in infrastructure and social projects, and by cutting corporate taxes.

12 November

US Treasury Secretary Henry Paulson says the government has abandoned plans to use some of the $700bn bail-out money to buy up banks' bad debts and decided instead to concentrate on improving the flow of credit for the US consumer.

14 November

The eurozone officially slips into recession after EU figures show that the economy shrank by 0.2% in the third quarter.

Leaders of the G20 developed and emerging economies gather in Washington to discuss ways to contain the financial crisis and agree on longer-term reforms.

20 November

The International Monetary Fund (IMF) approves a $2.1bn (£1.4bn) loan for Iceland , after the country's banking system collapsed in October. It is the first IMF loan for a Western European nation since 1976.

23 November

The US government announces a $20bn (£13.4bn) rescue plan for troubled banking giant Citigroup after its shares plunge by more than 60% in a week.

24 November

The UK government announces a temporary cut in the level of VAT - to 15% from 17.5% - in its pre-Budget report . Chancellor Alistair Darling also says government borrowing will rise to record levels, but defends the move as essential to save the UK from a deep and long-lasting recession.

25 November

The US Federal Reserve announces it will inject another $800bn into the economy in a further effort to stabilise the financial system and encourage lending. About $600bn will be used to buy up mortgage-backed securities while $200bn is being targeted at unfreezing the consumer credit market.

26 November

The European Commission unveils an economic recovery plan worth 200bn euros which it hopes will save millions of European jobs. The scheme aims to stimulate spending and boost consumer confidence.


1 December

The US recession is officially declared by the National Bureau of Economic Research, a leading panel including economists from Stanford, Harvard and MIT. The committee concludes that the US economy started to contract in December 2007.

4 December

French President Nicolas Sarkozy unveils a 26bn euro stimulus plan to help France fend off financial crisis, with money to be spent on public sector investments and loans for the country's troubled carmakers.

11 December

Bank of America announces up to 35,000 job losses over three years following its takeover of Merrill Lynch. It says the cuts will be spread across both businesses.

The European Central Bank, as well as central banks in the UK, Sweden and Denmark, slash interest rates again.


16 December

The US Federal Reserve slashes its key interest rate from 1% to a range of zero to 0.25% - the lowest since records began.

19 December

President George W Bush says the US government will use up to $17.4bn of the $700bn meant for the banking sector to help the Big Three US carmakers, General Motors, Ford and Chrysler.

29 December

The US Treasury unveils a $6bn bail-out for GMAC, the car-loan arm of General Motors.

31 December

The FTSE 100 closes down 31.3% since the beginning of 2008 - the biggest annual fall in the 24 years since the index was started.

The Dax in Frankfurt lost 40.4% over the year while the Cac 40 in Paris dropped 42.7%.


5 January

US President-elect Barack Obama describes America's economy as "very sick" and says that the situation is worsening.

8 January

The Bank of England cuts interest rates to 1.5%, the lowest level in its 315-year history, as it continues efforts to aid an economic recovery in the UK.

9 January

Official figures show the US jobless rate rose to 7.2% in December, the highest in 16 years. The figures also indicate that more US workers lost jobs in 2008 than in any year since World War II.

13 January

China's exports register their biggest decline in a decade.

German Chancellor Angela Merkel unveils an economic stimulus package worth about 50bn euros ($67bn; £45bn) to kick-start Europe's largest economy.

14 January

The UK government unveils a plan to guarantee up to £20bn of loans to small and medium-sized firms, to help them survive the downturn.

US Commerce Department figures show retail sales fell by more than expected in December, as shoppers cut back on spending over the Christmas period. The news prompts big falls in share prices in the US and Europe.

15 January

The European Central Bank (ECB) cuts eurozone interest rates by half a percentage point to 2%. The ECB has now reduced rates four times from 4.25% in September as it continues efforts to bolster the eurozone economy.

The Irish government says it is to nationalise the Anglo Irish Bank after deciding pumping money into the lender was not enough to secure its future.

16 January

The US government reaches an agreement to provide Bank of America with another $20bn in fresh aid from its $700bn financial rescue fund. The emergency funding will help the troubled bank absorb the losses it incurred when it bought Merrill Lynch.

Struggling US banking giant Citigroup announces plans to split the firm in two, as it reports a quarterly loss of $8.29bn (£5.6bn).

23 January

The UK has officially entered a recession as fourth quarter GDP falls by 1.5% compared to the previous three months.

24 January

President Obama pledges that his economic recovery package will be at the centrepiece of his administration. Mr Obama says that 80% of the spending will take place within 18 months.

28 January

World economic growth is set to fall to just 0.5% this year, its lowest rate since World War II, warns the International Monetary Fund (IMF). It now projects the UK will see its economy shrink by 2.8% next year, the worst contraction among advanced nations.

The International Labour Organization said that as many as 51 million jobs worldwide could be lost this year because of the global economic crisis.

5 February

The Bank of England cuts interest rates to a record low of 1% from 1.5% - the fifth interest rate cut since October.

10 February

The former bosses of the two biggest UK casualties of the banking crisis - RBS and HBOS - apologise "profoundly and unreservedly" for their banks' failure.


17 February

US President Barack Obama signs his $787bn (£548bn) economic stimulus plan into law, calling it "the most sweeping recovery package in our history".

The plan is aimed at saving or creating 3.5 million jobs and boosting consumer spending and rebuilding infrastructure.

2 March

Insurance giant AIG reports the largest quarterly loss in US corporate history of $61.7bn (£43bn) in the final three months of 2008. The firm is also to receive an extra $30bn from the US government as part of a revamped rescue package.

Meanwhile, HSBC confirms it is seeking to raise £12.5bn ($17.7bn) from shareholders through a UK rights issue .The news came as HSBC revealed pre-tax profits for 2008 of $9.3bn (£6.5bn), down 62% on the previous year.

14 March

Finance ministers from the G20 group of rich and emerging nations have pledged to make a "sustained effort" to pull the world economy out of recession . The main summit takes place in London in April.

18 March

The US Federal Reserve says it will buy almost $1.2 trillion (£843bn) worth of debt to help boost lending and promote economic recovery.

2 April

Leaders of the world's largest economies reach an agreement at the G20 summit in London to tackle the global financial crisis with measures worth $1.1 trillion (£681bn).

22 April

The IMF raises its forecast of total financial sector writedowns to $4 trillion. It says in its Global Stability Report that only $1 trillion has been written down so far, and that almost half the exposure is outside the US.

22 April

The UK reveals its most pessimistic Budget forecast yet. Chancellor Alistair Darling says the UK economy will shrink by 3.5% in 2009 and predicts a £175bn budget deficit amounting to more than 10% of GDP.


1 May

One of the "big three" US carmakers, Chrysler, enters bankruptcy protection after pressure from the US government. The majority of its assets are to be sold to Fiat.

1 May

Bankers made "an astonishing mess" of the financial system, the UK Treasury Committee says. The effects of the banking crisis will be felt for generations, the MPs warned.

4 May

EU economies will shrink by 4% in 2009, the European Commission has forecast in its bleakest forecast to date. It also says unemployment will rise to 10.9%.

8 May

Ten of the biggest US banks have failed their stress tests and need fresh capital the US Treasury has said. It says they need to raise an additional $74.6bn, with the Bank of America the most exposed.

1 June

The world's largest carmaker, GM, enters bankruptcy protection after bondholders agree to a deal that means they lose 90% of their money. The US government loans the company an additional $50bn.

9 June

UK unemployment rate rises to 7.1% with 2.22 million people out of work in the first three months of 2009, the ONS says.

10 June

Global oil consumption fell for the first time since 1993 in 2008, according to BP's global energy outlook, in another sign of the depth of the recession.

10 June

Ten of the largest US banks say they will be able to repay the US Treasury the money they were lent under the TARP bail-out in October. The banks would have faced restrictions on executive pay.

11 June

Japan's economy contracted at an annualised rate of 14.2% in the first three months of 2009, a record rate of decline.

17 June

The US government announces a major reform of banking regulation to prevent future financial crises. President Barack Obama describes it as the biggest shake-up of the US system of financial scrutiny since the 1930s.

24 June

The Organisation for Economic Co-operation and Development says the world economy is near the bottom of the worst recession in post-war history, predicting that the 30 most industrialised nations will see negative growth of 4.1% this year.

10 July

General Motors says it has emerged from bankruptcy protection after creating a "new GM" made up of the carmaker's best assets. The leaner GM will own four key brands including Cadillac and will be 61% owned by the US government.

14 July

US bank Goldman Sachs beats analysts' forecasts with a net profit of $3.44bn (£2.1bn) for April to June. It says it has set aside $6.65bn for pay and bonuses in the quarter. Several - but not all - other US banks subsequently announce big profits. However, analysts warn that the US banking crisis is not yet over.

15 July

UK unemployment rose by a record 281,000 to 2.38 million in the three months to May, the Office for National Statistics says. The jobless rate increased to 7.6%, the highest in more than 10 years.

16 July

China's economy grew at an annual rate of 7.9% between April and June, up from 6.1% in the first quarter, thanks to the government's big stimulus package. Beijing now expects China to achieve 8% growth for 2009 as a whole.

24 July

The UK economy contracted 0.8% between April and June, more than double the figure economists had expected. The latest figures take the annual rate of decline to 5.6%, the biggest fall since records began in 1955.

3 August

Barclays announces an 8% rise in first-half profits, boosted by its investment banking division. In subsequent days, as other UK banks announce their results for the period, a mixed picture emerges.

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