A financial crisis is a situation in which the financial system of a country or region is severely disrupted, leading to a decline in economic activity and a loss of confidence in the financial system. Financial crises can be caused by a variety of factors, including asset price bubbles, excessive lending, and financial instability. The global financial crisis of 2007-2008 is an example of a severe financial crisis that had a significant impact on the global economy.
There are a number of steps that can be taken to avoid financial crises. These include: