A Credit Crunch? a Case Study of Finland in the Aftermath of the Banking Crisis

December 1, 1996

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Ceyla Pazarbasioglu. A Credit Crunch? a Case Study of Finland in the Aftermath of the Banking Crisis, (USA: International Monetary Fund, 1996) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper estimates a disequilibrium model of credit supply and demand to evaluate whether there was a credit crunch in Finland following the banking crisis of 1991-92. Empirical analysis suggests that the marked reduction in bank lending was mainly in reaction to a cyclical decline in credit demand, likely exacerbated by the high level of indebtedness of the borrowers. It also appears that banks became less willing to supply credit during periods associated with a deterioration in asset quality, and reduced profits due to declining regulatory protection from competition, and a need to increase capital adequacy levels.

Subject: Bank credit, Banking, Banking crises, Credit, Credit risk, Financial crises, Financial institutions, Financial regulation and supervision, Loans, Money

Keywords: Bank asset value, Bank capital, Bank credit, Bank customer, Bank funding, Banking crises, Business credit, Credit, Credit demand equation, Credit loss, Credit risk, Credit supply, Deregulation period, Excess demand, Loans, Money market debt, Reduction in bank lending, WP

Publication Details

Pages:

18
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1996/135
Stock No:

WPIEA1351996
ISBN:

9781451855661
ISSN:

1018-5941

Notes

Also published in Staff Papers, Vol. 44, No. 3, September 1997.

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