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Learning from Financial Crisis: The Experience of Nordic Banks

41 Pages Posted: 14 Feb 2017  

Tom Berglund

Hanken School of Economics - Department of Economics

Mikko Mäkinen

Bank of Finland

Date Written: December 9, 2016

Abstract

To study whether banks retain their lessons from the experience of a severe financial crisis, we examine the effects of the systemic banking crisis of the early 1990s in three Nordic countries (Finland, Norway, and Sweden). While this crisis largely bypassed the rest of Europe, we hypothesize that banks in the three affected Nordic countries took their crisis experiences to heart and as a result outperformed other European banks during the 2008 global financial crisis. Based on a large panel data set of Nordic and European banks for the period 1994–2010, our findings support our main hypothesis that the Nordic banks learned from the 1990s crisis and adjusted their business models accordingly. Our descriptive analysis of Nordic banks finds evidence of “lessons learned” in such precautions as robust capital cushions, improvements in management efficiency and higher credit quality demands relative to the rest of Europe.

Keywords: financial crises, European banks, learning, bank performance

JEL Classification: G01, G21, G34

Suggested Citation

Berglund, Tom and Mäkinen, Mikko, Learning from Financial Crisis: The Experience of Nordic Banks (December 9, 2016). Bank of Finland Research Discussion Paper No. 30/2016. Available at SSRN: https://ssrn.com/abstract=2914022

Tom Patrik Berglund (Contact Author)

Hanken School of Economics - Department of Economics ( email )

PO Box 479
FI-00101 Helsinki
Finland
+358-9-43133 345 (Phone)
+358-9-43133 382 (Fax)

Mikko Mäkinen

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

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