The Nordic Banking Crisis: Pitfalls in Financial Liberalization: Pitfalls in Financial Liberalization

Occasional Papers, April 20, 1998

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Bibliographic details

Authors: Burkhard Drees, Ceyla Pazarbasioglu
Published: April 20, 1998
Series: Occasional Papers
DOI: https://doi.org/10.5089/9781557757005.084

Overview

Examines the banking crises in Finland, Norway and Sweden in the early 1990s and draws policy conclusions from their experiences.
Emphasizes that factors beyond business cycle effects explain the Nordic countries' financial problems.
Notes that deregulation timing in all three countries coincided with a strongly expansionary macroeconomic momentum.

Key findings

The main reasons for the banking crises were:
- Delayed policy responses.
- Structural characteristics of the financial systems.
- Banks’ inadequate internal risk-management controls.
Business cycle timing alone does not account for the severity of the crises.

Policy conclusions and implications

Strengthen the timeliness of policy responses to emerging financial imbalances.
Address structural vulnerabilities in financial systems when liberalizing financial markets.
Improve banks’ internal risk-management controls and supervision to mitigate lending and credit risks.

Subjects and keywords

Subjects: Bank credit, Banking, Banking crises, Commercial banks, Credit, Financial crises, Financial institutions, Loans, Money
Keywords: bank, Bank credit, Banking crises, Commercial banks, Credit, deregulation, deregulation effort, Europe, foreign currency lending, lending, lending risk, loan loss, Loans, OP, rate, savings bank, stock-adjustment effect

The Nordic Banking Crisis: Pitfalls in Financial Liberalization: Pitfalls in Financial Liberalization by Burkhard Drees and Ceyla Pazarbasioglu, April 20, 1998.