The 2012 global financial crisis arose from risky lending practices that caused housing market
collapses. Banks engaged in risky subprime lending without proper oversight. When housing prices
declined, borrowers defaulted on subprime loans, causing losses for banks and a lack of liquidity and
interbank lending. This led to government bailouts of financial institutions to prevent a systemic
banking crisis. The crisis spread from the US to Europe and had widespread economic impacts around
the world.