Government
Relevance 4/5- Exposure
- Fiscal space and resolution regimes
- Actions
- Pre-position resolution tools and social protection triggers
- Stress the sovereign balance sheet on the supervisory path
- Watch
- Spreads
- Non-bank leverage
Likelihood, two years4Likelyto end-2028
Likelihood, ten years5Highly likelyto end-2036
Systemic impact5Catastrophicglobal
National impact5Catastrophictypical highly exposed nation
OnsetSudden
Duration (acute phase)1 year (recession 3 years)
Warning timeMonths (ignored)
ScopeGlobal
Recovery horizonYears
Capability loadHard 0/3Soft 3/3Economic 2/3domains loaded High
ConcurrencyStandalonetriggers 3 · triggered by 4
Confidence · movementmediumnew
Rated at Standard Severe. Likelihood type: systemic. Source of scores: ginc-desk-v0.2.
03Narrative
Dateline: March 2028
The repricing starts in the most crowded trade of the decade and does not stop there. Within three weeks, three mid-sized lenders have failed, a stablecoin has broken its peg and the private-credit funds that financed the data-centre boom have gated redemptions. Central banks face the choice the 2025 Bank of England scenario anticipated: inflation is still above target, so the first response is not to cut. Equities fall 48 per cent in London and 57 per cent in New York peak to trough. Commercial property marks down 39 per cent and the pension funds holding it discover the valuations were two years stale. Unemployment climbs for 18 months. Emerging-market currencies lose a third against the dollar; four sovereigns request programmes in a quarter. Governments that spent their fiscal space in the pandemic and the energy shock have 2 per cent of GDP to deploy and need 8. The policy debate is about who is rescued, and the political consequences arrive before the recovery does.
The dateline is illustrative, not a forecast. The narrative is hypothetical; the historical anchors below are real events.
04Summary
An asset bubble bursts, credit freezes and the world enters a severe recession. The specification is the supervisory 'severely adverse' scenario that every major regulator tests banks against, applied here to nations: unemployment up 5.5 points to 10 per cent, house prices down 30 per cent, commercial property down 39 per cent, equities down half. v0.2 added this scenario because v0.1 had no generic financial crisis, and no respected scenario set omits one.
05Historical anchors
| Event | Date | What happened | Calibrates |
|---|---|---|---|
| Global financial crisis | 2008–2009 | World output fell in 2009 for the first time since the war; unemployment in the US peaked at 10 per cent | Standard Severe path |
| Federal Reserve 2026 severely adverse scenario | February 2026 | Unemployment +5.5 points to 10 per cent; house prices −30 per cent; commercial real estate −39 per cent; spreads widen sharply; 32 banks | variable paths |
| Bank of England 2025 Bank Capital Stress Test | March 2025 | UK GDP −5 per cent; unemployment 8.5 per cent; house prices −28 per cent; CRE −50 per cent from 2022 peak; equities −48 per cent (UK) and −57 per cent (US); Bank Rate 8 per cent; CPI 10 per cent; calibrated to first-percentile historical distributions | inflationary variant |
| March 2020 dash for cash | March 2020 | Treasury market dysfunction; central bank backstops within days | liquidity channel |
| SVB and Credit Suisse | March 2023 | Interest-rate and liquidity failures that the credit-loss-focused stress tests had not modelled | scenario narrowness lesson |
| Asian financial crisis | 1997–1998 | Currency and banking crises across East Asia; IMF programmes | emerging-market channel |
06Parameters
Shown at their preset values. Parameters are not adjustable in this release and nothing on this page is computed from them. Custom settings run (Phase B) but are labelled 'non-standard run' and excluded from comparisons.
Common sliders at Standard Severe · read-only
1. Severity
majorsevere (Standard Severe)extreme
2. Duration (acute phase)
30 days90 days1 year (Standard Severe)3 years5 years
Standard Severe: 1 year (recession 3 years)
3. Onset
sudden (Standard Severe)rapid (weeks)gradual (years)
4. Warning time
nonedaysmonths (Standard Severe)
Standard Severe: months (ignored)
5. Scope
nationalregionalglobal (Standard Severe)
6. Origin
naturalaccidental (Standard Severe)adversarial (great power / neighbour / non-state)
Standard Severe: accidental (endogenous)
7. External support
fullpartial (Standard Severe)none
8. Concurrency
standalone (Standard Severe)plus one named scenarioplus two
9. Policy response assumed
none (pure exposure)current plans executed (Standard Severe)best practice
Standard Severe: current plans
10. Recovery horizon
monthsyears (Standard Severe)structural
Scenario-specific parameters · read-only
| Parameter | Default | Range or options | Note |
|---|---|---|---|
| Unemployment rise | 5.5 points | 3–8 | — |
| House price fall | 30 per cent | 15–45 | — |
| Equity fall | 50 per cent | 30–65 | — |
| Policy regime | inflationary | alternative: deflationary (rates to zero) | Rates rise before they fall |
| Sovereign–bank doom loop | off | — | On at Extreme |
| Private-credit and non-bank contagion | on | — | — |
07Transmission channels
- Asset repricing and margin calls.
- Funding stress in banks and non-banks.
- Credit contraction to firms and households.
- Unemployment and defaults.
- Fiscal deterioration and sovereign stress in weaker economies.
- Political backlash and protectionism.
08Capability loading
High: capability band shifts expected under current plans. Medium: band shifts under 'none' policy response only. Low: strain without band shift. Loads are judgement-based until the Atlas connects. Domains link to the Atlas.
| Domain | Load | Channel |
|---|---|---|
| Hard | ||
| Defence and security | Medium | budget compression; procurement deferred |
| Strategic infrastructure | Medium | investment pipeline stalls; PPPs fail |
| Critical technology | Medium | venture and research funding collapse |
| Soft | ||
| Government effectiveness | High | fiscal management, resolution regimes, social protection delivery |
| Human capital | High | youth unemployment, scarring, migration of talent |
| Influence and cohesion | High | trust in institutions; polarisation |
| Economic | ||
| Macro-financial | High | banking system, public debt, pensions, housing |
| Industry, trade and supply | High | demand collapse; trade finance |
| Energy and resources | Low | demand-side price falls |
09Stakeholders
Technology
Relevance 3/5- Exposure
- Venture funding and data-centre financing
- Actions
- Extend runway
- Reduce single-lender dependence
- Watch
- Private-credit redemptions
Investors
Relevance 5/5- Exposure
- The scenario is their native territory
- Actions
- Run the Fed and BoE paths across sovereign and corporate books
- Watch
- VIX
- HY spreads
- CRE marks
Public
Relevance 5/5- Exposure
- Jobs, mortgages, pensions
- Actions
- Not specified in v0.2
- Watch
- Unemployment claims
- Mortgage rates
10Regional exposure
| Region | Exposure | Rationale |
|---|---|---|
| North America | High | Origin and amplifier |
| Europe | High | Banks, CRE, fiscal space |
| China | Medium | Property overhang; capital controls insulate |
| Indo-Pacific | High | Export demand, open capital accounts |
| South Asia | Medium | — |
| Gulf and Middle East | Medium | Oil demand, sovereign wealth buffers |
| Africa | High | Market access lost, aid falls |
| Latin America and Caribbean | High | Currency and commodity channel |
| Russia and Eurasia | Medium | — |
11Early-warning indicators
| Indicator | Source | Threshold |
|---|---|---|
| VIX and MOVE | — | — |
| US and EU high-yield spreads | — | — |
| CRE price indices and REIT discounts to NAV | — | — |
| Private-credit redemption gates | — | — |
| EM sovereign spreads | EMBI | — |
| Bank CDS | — | — |
| Central bank facility usage | — | — |
| Global PMI | — | — |
12Compounds
- Triggers
- Triggered by
- Amplifying trends
- public and private debt levelsnon-bank finance growthequity concentration
- Key trends
- Asset bubbles & stretched valuationsCriticalBank resilience & deposit flightCriticalNon-bank finance growthCriticalSovereign debt accumulationVery highCapital concentration in AIVery highHousehold debt & housing affordabilityVery highCommercial real estate stressVery high
From the GINC 250: trends rated Very high or Critical for this scenario. All S03 trend scores.
13Rating rationale
| Rating | Band or level | Why |
|---|---|---|
| Likelihood, two years | 4Likely | Severe crises have arrived roughly once a decade; valuations and private-credit growth raise the near-term odds. |
| Likelihood, ten years | 5Highly likely | — |
| Systemic impact | 5Catastrophic | On the 2008 loss of output. |
| National impact | 5Catastrophic | — |
| Confidence | medium | Timing is unknowable; severity is well calibrated. |
Source of scores: ginc-desk-v0.2. Confidence refers to the rating, not the scenario. Calibration sources are listed with the anchors above and on the methodology page.
14Open questions
Contested assumptions for the panel to resolve.
- Whether the inflationary or deflationary regime should be Standard Severe.
- How to treat nations with capital controls.
- Whether a sovereign debt crisis in an advanced economy is S03 or S04.
15Commentary
No signed commentary in this build.
16Version and citation
- Version
0.2.0· active- Change log
- Full change log
0.2.0· 2 October 2026 · Entered the Library at v0.2 with GINC desk scores.
Cite as
GINC (2027). Scenario S03 Global financial crisis, Scenario Library v0.2. scenarios.ginc.org/library/global-financial-crisisContent and data are published under CC BY 4.0.