As the crucial Group of 20 (G20) financial summit in London on April 2 approaches, the world economy is still struggling with its worst downturn since the 1930s.

The deepening financial crisis is biting the real economy, dragging western nations into severe slumps, and choking world trade.

Traumatized financial industry

Standing in the breach is the financial industry in western countries, which was blamed for triggering the crisis. Many corporations are either cutting branches, waiting for government bailout money, or preparing to announce bankruptcy. The crisis also severely hit world stock markets, with banks becoming more reluctant to lend.

Being in the center of the storm, the American financial industry witnessed a grave loss.

The American Federal Deposit Insurance Corporation said last week that the nation's banks and thrifts lost US$32.1 billion in the final quarter of last year. That was the first quarterly deficit in 18 years, compared with the US$575 million profit in the fourth quarter of 2007.

The industry's net income for 2008 plunged from US$16.1 billion to US$10.2 billion.

Eighteen federally insured banks already have failed in the United States this year. Last year the number was 25, more than the total number of the previous five years, and up from only three in 2007.

Shares of Citigroup Inc., once the most powerful US bank, have fallen below US$1 this month. Pummeled by the financial crisis, the group has lost more than 98 percent of its value from its peak in October 2007, and is down more than 95 percent from a year ago.

The American International Group reported this month that it lost US$61.7 billion in the fourth quarter of last year, the largest corporate loss in history. AIG has benefited since from more than US$170 billion in a federal rescue.

HSBC Holdings PLC, the largest bank in Europe, early this month reported a 70-percent drop in its 2008 profit and said it would cut 6,100 jobs as it closes its consumer loan business in the United States. It also said it would cut its dividend and not pay bonuses to top executives.

The stock market remains volatile on uncertainties concerning the global economy. In the United States, the Dow Jones industrial average dived below 6,800 on March 3, its lowest close since May 1997, losing more than 50 percent from its highest level in October 2007.

However, US stocks staged their strongest rally this year on March 23 when the market was boosted by the government's latest plan on clearing bad bank assets and a larger-than-expected rise in existing home sales. The three main indexes all surged more than 6.5 percent.

In London, the FTSE index 100 slipped to a six-year-low on March 2, and a week later, Tokyo's Nikkei index closed at its lowest level in more than 26 years on renewed worries about the Japanese and global economy.