The Nordic Banking Crises: Pitfalls in Financial Liberalization?

70 Pages Posted: 15 Feb 2006

See all articles by Burkhard Drees

Burkhard Drees

International Monetary Fund (IMF) - IMF Institute

Ceyla Pazarba_1olu

affiliation not provided to SSRN

Date Written: June 1995

Abstract

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.

JEL Classification: E44, G21, G28

Suggested Citation

Drees, Burkhard and Pazarba_1olu, Ceyla, The Nordic Banking Crises: Pitfalls in Financial Liberalization? (June 1995). IMF Working Paper, Vol. , pp. 1-70, 1995. Available at SSRN: https://ssrn.com/abstract=883209

Burkhard Drees (Contact Author)

International Monetary Fund (IMF) - IMF Institute ( email )

700 19 th Street NW
Washington, DC 20431
United States

Ceyla Pazarba_1olu

affiliation not provided to SSRN

No Address Available

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