The IMF warns that a "collective failure" to appreciate the risky borrowing by financial institutions means that losses that were confined to investment banks are now spreading to other sectors including already beleaguered commercial property, consumer credit such as overdrafts and credit cards, and company debt.

The IMF's Global Stability Report warns that "despite unprecedented intervention by major central banks, financial markets remain under considerable strain, now compounded by a more worrisome macroeconomic environment, weakly capitalised institutions, and broad-based de-leveraging."

And it goes on to warn that the resultant downturn will be "broader, deeper and more protracted" than in previous episodes, due to the "degree of securitisation and leverage in the financial system"

The report blames lax regulation by governments and poor supervision by banks for allowing the situation to develop accusing them of "excessive risk-taking" and "weak underwriting".

It says they were "too complacent" about liquidity risks - the problems that would happen if they ran out of ready cash - and too ready to rely on wholesale money markets and central banks to help them if they got into trouble.

While it warns against "a rush to regulate", which it suggests could stifle innovation and make the credit crunch even worse., it does suggest regulation to stop banks hiding assets off the balance sheet.