Financial Crisis

Financial Crisis – A financial crisis is a situation in which the value of financial assets—such as stocks, bonds, currencies, and derivatives—experiences a sudden and severe decline, leading to widespread economic disruption. Financial crises can affect individuals, businesses, banks, and entire economies, often triggering recessions, liquidity shortages, and loss of confidence in financial systems. Key Features: Rapid devaluation of financial assets. Distress in banking and financial institutions. Reduced investor confidence and market instability. Spillover effects on employment, production, and economic growth.

Examples :of Financial Crises: 2008 Global Financial Crisis caused by the collapse of the U.S. housing market and Lehman Brothers. 1997 Asian Financial Crisis, triggered by currency devaluations in Southeast Asia.

Key Point: Financial crises highlight the interconnection between financial markets and the real economy, emphasizing the need for risk management, regulation, and oversight in the financial system. 140 Words