Why were banks reluctant to lend to each other and customers after the Global Financial Crisis hit?

Financial market and institutions

Discussion questions: The three discussion questions will cover 30 or 40 marks each, totalling 100 in all. It will be assessed based on the completeness of the answer, clearness of explanations, clarity of arguments and other criteria set for each specific question (such as providing examples, critical assessment, providing recommendations etc). Students should make the link from theories of financial markets that we cover in class to real life market developments and policy measures.

Ahead of the mid-term, here is a sample question and short model answer (one paragraph) that I would probably give full marks to.

Question: Why were banks reluctant to lend to each other and customers after the Global Financial Crisis hit?