A worldwide financial crisis of enormousmagnitude continues to unfold rapidly. Unlike other crisesin recent decades, the current episode is rooted inindustrial countries' financial systems and isaffecting low-income and middle-income countries (MICs)alike. Defaults on securitized sub-prime mortgages as a realestate market bubble burst led to failures or near-failuresof several large financial institutions and a collapse ofinter-bank and commercial paper markets. A tightening ofcredit, combined with declining consumer confidence, hasbrought on worldwide recession with growing unemployment,and many fear that the downturn will be severe andprotracted. At the same time, the rapidly multiplying signsof contraction are prompting strong responses, includingfiscal stimulus packages and reductions in benchmark lendingrates, on the part of several of the affected developedcountries. The Bank Group is well placed to help mitigatethe impact of the current crisis with financing and advisoryservices, and its clients are already requesting increasedsupport. A rapid, high-quality response that combinesfinancial and advisory support can do much to ease theinevitable ramifications of the crisis. Lessons fromevaluations of previous Bank Group responses to past crisescan help inform the response to the current crisis in orderto increase its effectiveness.
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