{
  "id": "S03",
  "slug": "global-financial-crisis",
  "title": "Global financial crisis",
  "version": "0.2.0",
  "status": "active",
  "orientation": "downside",
  "family": "A",
  "short_title": "Global financial crisis",
  "thematics": [
    "economic-security-supply-chains",
    "resilience-crisis-preparedness"
  ],
  "likelihood_type": "systemic",
  "likelihood_note": null,
  "scores": {
    "likelihood_2y": {
      "band": 4,
      "rationale": "Severe crises have arrived roughly once a decade; valuations and private-credit growth raise the near-term odds."
    },
    "likelihood_10y": {
      "band": 5,
      "rationale": ""
    },
    "impact_systemic": {
      "level": 5,
      "rationale": "On the 2008 loss of output."
    },
    "impact_national": {
      "level": 5,
      "rationale": ""
    },
    "confidence": {
      "level": "medium",
      "reason": "Timing is unknowable; severity is well calibrated."
    },
    "priority": 20,
    "tier": "I",
    "source": "ginc-desk-v0.2"
  },
  "scorecard": {
    "onset": "sudden",
    "duration": "1 year (recession 3 years)",
    "warning": "months (ignored)",
    "scope": "global",
    "origin": "accidental (endogenous)",
    "external_support": "partial",
    "policy_response": "current plans",
    "recovery_horizon": "years"
  },
  "summary": "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.",
  "narrative": {
    "dateline": "March 2028",
    "text": "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."
  },
  "anchors": [
    {
      "shock_id": "global-financial-crisis-2008",
      "date": "2008–2009",
      "event": "Global financial crisis",
      "what_happened": "World output fell in 2009 for the first time since the war; unemployment in the US peaked at 10 per cent",
      "calibrates": "Standard Severe path"
    },
    {
      "shock_id": "federal-reserve-2026-severely-adverse-scenario",
      "date": "February 2026",
      "event": "Federal Reserve 2026 severely adverse scenario",
      "what_happened": "Unemployment +5.5 points to 10 per cent; house prices −30 per cent; commercial real estate −39 per cent; spreads widen sharply; 32 banks",
      "calibrates": "variable paths"
    },
    {
      "shock_id": "bank-of-england-stress-test-2025",
      "date": "March 2025",
      "event": "Bank of England 2025 Bank Capital Stress Test",
      "what_happened": "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",
      "calibrates": "inflationary variant"
    },
    {
      "shock_id": "march-2020-dash-for-cash",
      "date": "March 2020",
      "event": "March 2020 dash for cash",
      "what_happened": "Treasury market dysfunction; central bank backstops within days",
      "calibrates": "liquidity channel"
    },
    {
      "shock_id": "svb-and-credit-suisse-2023",
      "date": "March 2023",
      "event": "SVB and Credit Suisse",
      "what_happened": "Interest-rate and liquidity failures that the credit-loss-focused stress tests had not modelled",
      "calibrates": "scenario narrowness lesson"
    },
    {
      "shock_id": "asian-financial-crisis-1997",
      "date": "1997–1998",
      "event": "Asian financial crisis",
      "what_happened": "Currency and banking crises across East Asia; IMF programmes",
      "calibrates": "emerging-market channel"
    }
  ],
  "parameters": {
    "common": {
      "severity": {
        "major": "major",
        "severe": "severe",
        "extreme": "extreme"
      },
      "duration": {
        "major": null,
        "severe": "1 year (recession 3 years)",
        "extreme": null
      },
      "onset": {
        "major": null,
        "severe": "sudden",
        "extreme": null
      },
      "warning": {
        "major": null,
        "severe": "months (ignored)",
        "extreme": null
      },
      "scope": {
        "major": null,
        "severe": "global",
        "extreme": null
      },
      "origin": {
        "major": null,
        "severe": "accidental (endogenous)",
        "extreme": null
      },
      "external_support": {
        "major": null,
        "severe": "partial",
        "extreme": null
      },
      "concurrency": {
        "major": null,
        "severe": "standalone",
        "extreme": null
      },
      "policy_response": {
        "major": null,
        "severe": "current plans",
        "extreme": null
      },
      "recovery_horizon": {
        "major": null,
        "severe": "years",
        "extreme": null
      }
    },
    "specific": [
      {
        "name": "Unemployment rise",
        "default": "5.5 points",
        "range": "3–8",
        "unit": "points",
        "note": null
      },
      {
        "name": "House price fall",
        "default": "30 per cent",
        "range": "15–45",
        "unit": "per cent",
        "note": null
      },
      {
        "name": "Equity fall",
        "default": "50 per cent",
        "range": "30–65",
        "unit": "per cent",
        "note": null
      },
      {
        "name": "Policy regime",
        "default": "inflationary",
        "range": "alternative: deflationary (rates to zero)",
        "unit": null,
        "note": "rates rise before they fall"
      },
      {
        "name": "Sovereign–bank doom loop",
        "default": "off",
        "range": null,
        "unit": null,
        "note": "on at Extreme"
      },
      {
        "name": "Private-credit and non-bank contagion",
        "default": "on",
        "range": null,
        "unit": null,
        "note": null
      }
    ]
  },
  "transmission": [
    "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."
  ],
  "loading": [
    {
      "dimension": "Hard",
      "domain": "defence-security",
      "load": "Medium",
      "channel": "budget compression; procurement deferred"
    },
    {
      "dimension": "Hard",
      "domain": "strategic-infrastructure",
      "load": "Medium",
      "channel": "investment pipeline stalls; PPPs fail"
    },
    {
      "dimension": "Hard",
      "domain": "critical-technology",
      "load": "Medium",
      "channel": "venture and research funding collapse"
    },
    {
      "dimension": "Soft",
      "domain": "government-effectiveness",
      "load": "High",
      "channel": "fiscal management, resolution regimes, social protection delivery"
    },
    {
      "dimension": "Soft",
      "domain": "human-capital",
      "load": "High",
      "channel": "youth unemployment, scarring, migration of talent"
    },
    {
      "dimension": "Soft",
      "domain": "influence-cohesion",
      "load": "High",
      "channel": "trust in institutions; polarisation"
    },
    {
      "dimension": "Economic",
      "domain": "macro-financial",
      "load": "High",
      "channel": "banking system, public debt, pensions, housing"
    },
    {
      "dimension": "Economic",
      "domain": "industry-trade-supply",
      "load": "High",
      "channel": "demand collapse; trade finance"
    },
    {
      "dimension": "Economic",
      "domain": "energy-resources",
      "load": "Low",
      "channel": "demand-side price falls"
    }
  ],
  "stakeholders": {
    "government": {
      "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"
      ],
      "relevance": 4
    },
    "technology": {
      "exposure": "Venture funding and data-centre financing",
      "actions": [
        "Extend runway",
        "Reduce single-lender dependence"
      ],
      "watch": [
        "Private-credit redemptions"
      ],
      "relevance": 3
    },
    "investors": {
      "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"
      ],
      "relevance": 5
    },
    "public": {
      "exposure": "Jobs, mortgages, pensions",
      "actions": [],
      "watch": [
        "Unemployment claims",
        "Mortgage rates"
      ],
      "relevance": 5
    }
  },
  "regions": [
    {
      "region": "north-america",
      "exposure": "High",
      "rationale": "Origin and amplifier"
    },
    {
      "region": "europe",
      "exposure": "High",
      "rationale": "Banks, CRE, fiscal space"
    },
    {
      "region": "china",
      "exposure": "Medium",
      "rationale": "Property overhang; capital controls insulate"
    },
    {
      "region": "indo-pacific",
      "exposure": "High",
      "rationale": "Export demand, open capital accounts"
    },
    {
      "region": "south-asia",
      "exposure": "Medium",
      "rationale": null
    },
    {
      "region": "gulf-middle-east",
      "exposure": "Medium",
      "rationale": "Oil demand, sovereign wealth buffers"
    },
    {
      "region": "africa",
      "exposure": "High",
      "rationale": "Market access lost, aid falls"
    },
    {
      "region": "latin-america",
      "exposure": "High",
      "rationale": "Currency and commodity channel"
    },
    {
      "region": "russia-eurasia",
      "exposure": "Medium",
      "rationale": null
    }
  ],
  "indicators": [
    {
      "name": "VIX and MOVE",
      "source": null,
      "threshold": null,
      "cadence": null
    },
    {
      "name": "US and EU high-yield spreads",
      "source": null,
      "threshold": null,
      "cadence": null
    },
    {
      "name": "CRE price indices and REIT discounts to NAV",
      "source": null,
      "threshold": null,
      "cadence": null
    },
    {
      "name": "Private-credit redemption gates",
      "source": null,
      "threshold": null,
      "cadence": null
    },
    {
      "name": "EM sovereign spreads",
      "source": "EMBI",
      "threshold": null,
      "cadence": null
    },
    {
      "name": "Bank CDS",
      "source": null,
      "threshold": null,
      "cadence": null
    },
    {
      "name": "Central bank facility usage",
      "source": null,
      "threshold": null,
      "cadence": null
    },
    {
      "name": "Global PMI",
      "source": null,
      "threshold": null,
      "cadence": null
    }
  ],
  "compounds": {
    "triggers": [
      {
        "id": "S04",
        "note": "many nations"
      },
      {
        "id": "S07",
        "note": null
      },
      {
        "id": "S01",
        "note": "protectionist response"
      }
    ],
    "triggered_by": [
      {
        "id": "S09",
        "note": null
      },
      {
        "id": "S13",
        "note": "AI equity concentration"
      },
      {
        "id": "S05",
        "note": null
      },
      {
        "id": "S14",
        "note": null
      }
    ],
    "amplified_by": [],
    "triggered_by_other": [],
    "amplifying_trends": [
      "public and private debt levels",
      "non-bank finance growth",
      "equity concentration"
    ]
  },
  "open_questions": [
    "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."
  ],
  "commentary": null,
  "overview": {
    "source": "ginc-desk-v0.2",
    "lenses": {
      "political": "The policy debate is about **who is rescued**. The political consequences arrive before the recovery does.",
      "economic": "Equities fall by half, commercial property by 39 per cent and house prices by 30 per cent. Unemployment reaches **10 per cent**.",
      "social": "Unemployment climbs for 18 months. **Youth scarring**, mortgage stress and stale pension valuations reach households.",
      "technological": "Venture and research funding collapse. The private-credit funds that financed the **data-centre boom** gate redemptions.",
      "legal": "**Resolution regimes** are tested as mid-sized lenders fail and a stablecoin breaks its peg.",
      "environmental": "Demand collapses and **energy prices fall**; the investment pipeline stalls."
    },
    "regions": {
      "north-america": "**Origin and amplifier**. The repricing starts in the most crowded trade of the decade and equities fall 57 per cent.",
      "europe": "Banks, commercial property and thin **fiscal space**. Central banks facing inflation do not cut first.",
      "china": "The **property overhang** deepens, while capital controls insulate the financial system.",
      "indo-pacific": "Export demand falls and **open capital accounts** transmit the funding stress.",
      "south-asia": "Currencies lose ground against the dollar as **capital leaves** emerging markets.",
      "gulf-middle-east": "**Oil demand** falls; sovereign wealth buffers absorb the first round.",
      "africa": "**Market access is lost** and aid falls. Sovereigns request programmes.",
      "latin-america": "The **currency and commodity** channel: depreciation and falling export prices arrive together.",
      "russia-eurasia": "Commodity export revenue falls with **global demand**."
    }
  },
  "history": [
    {
      "edition": 2027,
      "rank": 1,
      "L2y": 4,
      "L10y": 5,
      "impact_systemic": 5,
      "impact_national": 5,
      "confidence": "medium"
    }
  ],
  "changelog": [
    {
      "version": "0.2.0",
      "date": "2026-10-02",
      "change": "Entered the Library at v0.2 with GINC desk scores."
    }
  ],
  "citation": "GINC (2027). Scenario S03 Global financial crisis, Scenario Library v0.2. scenarios.ginc.org/library/global-financial-crisis"
}