Investment banking firm Lehman Brothers, one of largest in the world, has said that it is going to file for bankruptcy.

Asian markets tumbled on the news of one of the worst banking collapses in recent history. European and American markets are expected to do the same as soon as they open for trading in a few hours from now.

Lehman Brothers is tethering on the verge of collapse after a weekend full of negotiations failed to find a buyer for the firm. Discussions were led by US treasury secretary Henry Paulson, but British bank Barclays decided to walk away from the deal, citing shareholder interest.

The list of potential buyers for Lehman also included Bank of America, who preferred to acquire Merrill Lynch instead, in the absence of financial backing from Federal authorities.

Global markets in turmoil
Global markets are in turmoil following the two events in United States, the acquisition of brokerage firm Merrill Lynch by Bank of America, and Lehman Brothers' move to file for Chapter 11 bankruptcy protection. By declaring bankruptcy, Lehman's subsidiaries can still continue to function, even as the company is wound down.

A consortium of 10 banks, including Citigroup, the Credit Suisse Group, and Barclays have agreed to create a $70 billion borrowing facility that could be used to tide over the financial crisis. Each member of the consortium would invest $7 billion. The other banks are Bank of America, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, and UBS.

There hav also been reports of insurance firm AIG being in trouble, and urgently needing a capital infusion to survive beyond a few days.

The preferred suitor for Lehman Brothers, Barclays bank of the UK, withdrew its bid for the investment bank, saying that while Lehman was ''attractive'', it did not match up to Barclay's stringent standards.

Reports in the media track the efforts of US government officials and Wall Street bankers who are trying to find a buyer for Lehman Brothers before the markets open on Monday. However, with Barclays walking away, Asian markets have already tumbled, and markets in Europe and the US are expected to follow suit.

Shareholder interest for Barclays, BankAm
Barclays said it considered buying Lehman Brothers, but decided against it in the ''best interest of shareholders.''

In a statement, the UK's third largest bank said, "We confirm that Barclays considered a combination with Lehman Brothers and did not proceed because it was not possible to conclude a transaction in the best interests of Barclays' shareholders".

The other potential suitor, Bank of America Corp. also withdrew from Lehman talks, and instead decided in favour of picking up Merrill Lynch and Co. for $50 billion in an all-stock deal.