On this day, eight years ago, U.S. banking giant Lehman Brothers filed for bankruptcy, sending shockwaves across the global financial markets. Now in 2016, has the world learned anything from the worst day in the history of banking?
"The banking sector has still not recovered," David Buik, a market commentator at Panmure Gordon told CNBC via email. "Though the market is grateful for small mercies – massive quantitative easing, which bought time and restored confidence, regulation's hob-nailed boots left their prints across the backs of every bank in the world."
The investment bank filed for bankruptcy in the early hours of September 15 and by afternoon central banks across the globe had started putting together a plan of action to put a brake on plummeting financial markets. By end of the day, more than 25,000 staff members at Lehman prepared for redundancy.
"The Lehman Brothers collapse made financial institutions realise that the most precious thing they are entrusted with is trust – and that winning that back was going to take both structural and cultural change that would have been unimaginable just a few years before," Michael Cole-Fontayn, EMEA Chairman at BNY Mellon told CNBC via email. "Since 2008, banks around the world have strengthened their balance sheets, held more capital and more liquid assets. They've invested heavily in risk management. "
Fontayn adds that banks have gone back to basics, stepping away from high-risk activities such as repackaging and reselling loans.
However, the state of the banking system still remains fragile. A number of analysts have said that the U.S. banking system is in a better state than the European banking system. The reasons for these have been a low interest rate environment, sluggish economic growth and uncertainties surrounding Brexit.
Big European banks like Deutsche Bank and Credit Suisse saw their shares plunge to an all-time low after results of the U.K.'s referendum on remaining in Europe on June 23. While the fall in Deutsche Bank's share price is not very different from some other banks like the Royal Bank of Scotland, down nearly 35 percent since the beginning of the year, it faces regular comparisons with the ill-fated Lehman Brothers.
The cost of insuring exposure to Deutsche Bank debt has risen sharply, signaling it as a risky asset and inviting further comparisons with Lehman Brothers. Five-year credit default swaps (CDS) rose to 235 basis points last month, currently at its highest among all investment banks, and a massive jump from 95 basis points at the start of the year, according to data from Markit. Reports have also pointed to Deutsche Bank's global derivatives risk in the range of $75 trillion which is 20 times greater than the German gross domestic product (GDP). Shares in Deutsche Bank fell further after the bank's U.S. unit failed stress tests this year.
Add to that the bank's falling market valuation, currently pegged at $18 billion, similar to that of social network company Snapchat, and investors are increasingly worried.
"Deutsche Bank unlike Lehman will not be allowed to fail," Alastair Winter, chief economist at Daniel Stewart told CNBC via email. "It is also likely that they are much more aware of their problems even if they are unable or unwilling to quantify them properly."
Winter also explains that while the outlook for the sector is poor, it will not end in a slump or a stock market crash. But he warns that European banks should deal with its problems of increasing non-performing loans that is affecting the ability of banks to lend. The biggest problem of non-performing loans in Europe can be seen in Italian banks with loans estimated to total around 360 billion euros ($401 billion).
However, a number of analysts have said that the situation is not as gloomy as it was eight years ago. While the global economy will take time to come out of the crisis, improvement can be seen in a number of sectors.
"We have had a sustained recovery in the U.S., U.K., Canada and Germany - where unemployment has come down to pre-crisis levels, Andrew Sentance, ex-Bank of England Monetary Policy Committee (MPC) member told CNBC via email.
He further explained that the economies within the G-7 countries that are struggling are doing so due to their own structural problems, which are holding back growth.
On the banking front, analysts have pointed to banks putting safer practices in place in order to get a better understanding of risks.
"Much of the toxic asset exposure has been run down or run off," Mark Peden, co-manager of Kames Global Equity Income told CNBC via email. He lists the NPLs in Italy and Deutsche Bank to be two problematic areas but doesn't think they are of systemic nature.
Markets however continue to remain concerned about uncertainties surrounding Brexit and the impact it could have for banks with operations in London. "It's a total red-herring," Panmure Gordon's Buik said. "London is the most influential center in Europe by far and having spent 70 years building infrastructure it is not going to be allowed to be usurped by Frankfurt, Paris, Dublin or anywhere else."