Backgrounder: Developments of global financial crisis

ISTANBUL, Sept. 30 -- The International Monetary Fund (IMF) and World Bank annual meetings slated for Oct. 6-7 in the Turkish city of Istanbul will discuss key economic and financial issues on recovery from the worst global recession since the 1930s.

The global financial crisis and the ripples it sent across the world economy have devastated banking systems, erased jobs and stagnated global trade since its beginning last year.

Following are major facts about the crisis and its developments:

The crisis has its roots in the imbalance of the global economic structure, years of freewheeling lending in the United States and loose regulation on financial markets.

The crisis was triggered by a subprime mortgage meltdown that erupted in the United States in the summer of 2007, which forced closure of many companies that largely invested in products related to subprime mortgages and tightened credit around the world.

As the subprime mortgage losses spread, Lehman Brothers' bankruptcy and Merrill Lynch's buyout in September 2008 marked the outbreak of the global financial crisis. Credit malfunction deepened while stocks and commodities plunged.

The U.S. government pledged in October to invest 700 billion U.S. dollars in bailout to cash-stripped financial institutions.

The crisis soon sent shock waves to other parts of the world. As one of the hardest-hit countries, Iceland saw its banking industry collapse within two weeks in October 2008, accompanied by a dive in stock prices and depreciation of the country's currency and had to seek 6 billion dollars of aid from the IMF.

As the crisis caused downturns in European and U.S. economies, exports to those countries tumbled and developing countries were affected. The IMF provided at least 52 billion dollars to Hungary, Serbia, Latvia and Ukraine, which saw severe capital flight and a sharp drop in exports.

The United States, Japan and the European Union (EU) all slipped into economic recessions as demand sagged.

Central banks around the world cut interest rates while governments rolled out stimulus plans to support the economy.

In a swift and strong response to the crisis, the Chinese government announced a 585-billion-dollar stimulus package in November 2008 to be rolled out over the next two years aiming at expanding domestic demand and promoting economic growth.

In February 2009, U.S. President Barack Obama signed a 787-billion-dollar stimulus package in hopes of invigorating the U.S. economy through government investment and tax cuts.

The United States saw a large scale of government intervention into private firms amid the crisis. In March 2009, the U.S. government further announced a "toxic asset plan" that would form public-private partnerships to help cleanse banks of up to 1 trillion dollars in toxic assets.

Between April and June 2009, auto producers Chrysler and General Motors were forced by the government to file for bankruptcy protection.

Stronger role of international financial organizations and better supervision on financial sectors were demanded. The Group of 20 leaders agreed in April to provide up to 1.1 trillion dollars for the IMF and the World Bank as well as to tighten monitoring of financial activities.

To rebuild confidence in their financial systems, the U.S. government in July announced a comprehensive reform plan on financial monitoring and the EU leaders also passed a reform plan aimed at establishing a pan-Europe financial monitoring system.

The financial crisis prompted a cry for transparency of fund flows. Tax havens including Switzerland, Andorra, Liechtenstein and Belgium agreed in March to loosen their confidentiality rules to cooperate with other nations on cracking down on cross-border tax evasion.

High bonuses paid to executives in financial institutions also came under fire amid the crisis in the United States.

President Obama ordered the Treasury Department to prevent the 165 million dollars of executive bonuses from being paid in the insurance giant American International Group in March, while the executives returned part of their bonuses under the pressure of public reprimand.