The Nordic Banking Crises : Pitfalls in Financial Liberalization?

Author/Editor:

Burkhard Drees ; Ceyla Pazarbasioglu

Publication Date:

June 1, 1995

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 examines the recent banking crises in Finland, Norway and Sweden in an attempt to draw some policy conclusions from their experiences. In all three countries, the timing of deregulation coincided with a strongly expansionary macroeconomic momentum. Delayed policy responses, as well as structural characteristics of the financial systems, and banks’ inadequate internal risk management controls were important determinants of the consequences of the transition from tightly regulated to more or less competitive financial systems. In the absence of strengthened prudential banking supervision, these incentives coupled with expectations of government intervention in the event of a crisis prompted many Nordic banks to increase their lending excessively.

Series:

Working Paper No. 95/61

Subject:

English

Publication Date:

June 1, 1995

ISBN/ISSN:

9781451848113/1018-5941

Stock No:

WPIEA0611995

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

70

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