Why Were Banks Better Off in the 2001 Recession?

Abstract

In a sharp turnaround from their fortunes in the 1990-91 recession, banks came through the 2001 recession reasonably well. A look at industry and economy-wide developments in the intervening years suggests that banks fared better largely because of more effective risk management. In addition, they benefited from a decline in short-term interest rates and the relative mildness of the 2001 downturn.

Keywords: risk management, bank performance, risk-based pricing, diversification

JEL Classification: E32, G21, G28