Preparations are being made for Lehman Brothers, the fourth-largest investment bank in the US, to file for bankruptcy.
The two strongest potential buyers appear to have pulled out of talks to rescue Lehman - the latest victim of the American credit crisis.
If no new financing comes before Wall Street opens, it will have to seek "Chapter 11" bankruptcy protection.
This could result in a severe shock to the global financial system, as banks unwind their complex deals with Lehman.
Late on Sunday the US central bank, the Federal Reserve, announced new moves to ease access to emergency credit for struggling financial companies.
The Fed said the step - which broadens the types of securities financial institutions can use to obtain emergency loans - was designed to mitigate the potential risks and disruptions to markets.
In a related move, a consortium of 10 investment banks announced a $70bn (£39bn) loan program that troubled financial companies can use to help ease the credit shortage.
BBC business editor Robert Peston on the potential implications
The banks - Bank of America, Barclays, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan, Merrill Lynch, Morgan Stanley and UBS - each agreed to provide $7bn (£4bn) to the pool.
On Monday, Asian stock markets fell amid concerns over the fate of Lehman Brothers.
Singapore stocks dropped 2.26% in morning trading and shares in Taiwan fell 1.83%.
Markets in Tokyo, Hong Kong, Shanghai and Seoul were closed for public holidays.
Lehman employs about 25,000 worldwide, including 5,000 in the UK.
Accountancy firm PWC has already been lined up to run the British operations of Lehman should the firm go into administration.
BBC business editor Robert Peston says UK bank Barclays' decision to walk away from a Lehman deal was a huge setback for the effort to rescue the Lehman.
Barclays terminated the negotiations because it was unable to obtain guarantees in relation to financial commitments faced by Lehman when markets open on Monday.
Bad bank, good bank
The rescue effort for Lehman was being co-ordinated by the US Treasury and the New York Federal Reserve.
No other large firm should buy Lehman whole - its toxic real estate and securities are too difficult to value
Peter MoriciUniversity of Maryland
Robert Peston's BBC blog
The US government had hoped to arrange a bailout under which other US investment banks would finance a "bad bank" that would hold the most "toxic" investments of Lehman in the property and mortgage market.
The "good bank" or rest of the firm, including its investment and wealth management arms, would then be sold to another financial institution, for example Bank of America or the UK's Barclays.
Although such a deal would have cost the other investment banks millions, it might have restored confidence in the sector and avoided a sharp drop in the share price of all banks.
However, it appears that this plan is falling apart.
"The only thing that can prevent Lehman collapsing would be a huge injection of taxpayers' money," a banker close to the talks told the BBC, but added that US Treasury Secretary "Hank Paulson has made it clear he doesn't want to do that".
Hard choices
Bank of America, meanwhile, is said to be unconvinced that buying Lehman would be in the interest of its shareholders.
Instead, according to a report in the New York Times, Bank of America is in "advanced talks" to buy investment bank Merrill Lynch for more than $38bn.
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Like other US investment banks Merrill has suffered losses of tens of billions of dollars in the subprime crisis, and has seen its share price plummet during recent months.
"No other large firm should buy Lehman whole - its toxic real estate and securities are too difficult to value," said Peter Morici of the business school of the University of Maryland.
Lehman is up for sale after it reported a $3.9bn (£2.2bn) quarterly loss last week amid concerns over its long term financial viability.
The firm's share price has plummeted as fears over its future have mounted.
Former Federal Reserve boss Alan Greenspan said the US government faced "very difficult decisions" over Lehman if it could not secure a rescue deal that did not involve public funds.
Yet Mr Greenspan said it would be "unsustainable" for the government to bail out every US bank that got itself into difficulty.
Predicting that Lehman would not be the last to require rescuing, Mr Greenspan added that this would not necessarily pose a problem.
"The ordinary course of financial change has winners and losers," he said.