Lessons Learned from Previous Banking Crises: Sweden, Japan, Spain, and Mexico

(PRWEB) May 4, 2009 -- The Group of Thirty has released "Lessons Learned from Previous Banking Crises: Sweden, Japan, Spain, and Mexico." The paper is co-authored by Stefan Ingves, Göran Lind, Masaaki Shirakawa, Jaime Caruana, and Guillermo Ortiz Martínez. The paper provides a clear comparative narrative of the key similarities and differences seen in these previous major national banking crisis and responses of the respective policymakers.

Stefan Ingves, Governor of the Sveriges Riksbank, and Göran Lind, a Senior Advisor, dissect the Swedish banking crisis of the early 1990s. They detail the "Swedish model" of nationalizing banks, restructuring them, and selling off the assets. They consider its relevance to today's financial crisis, and offer key observations for supervisors and central bankers.

Masaaki Shirakawa, Governor of the Bank of Japan, addresses the Japanese financial crisis of the 1990s. He underscores the similarities of his country's experience and that of the United States, with the principal cause of being an asset bubble in housing. Mr. Shirakawa compares policy responses to both crises, noting that the U.S. has been faster than Japan in pursuing fiscal and monetary policy solutions.

Jaime Caruana, General Manager of the Bank for International Settlements, analyzes the Spanish banking crisis of 1978-83. The main culprit of the crisis was an asset bubble, weak banks, and inadequate regulation stemming from the liberalization of the 1970s. After the crisis, Caruana describes how the regulatory framework and requirements were toughened, resulting in a stronger more resilient Spanish banking system.

Finally, Guillermo Ortiz, Governor of the Central Bank of Mexico, discusses lessons of the 1995 Mexican banking crisis. He cites the main cause of its crisis as rapid liberalization and deregulation after years of government nationalization of banks. The governor emphasizes that the key lesson to remember from Mexico's crisis is that national authorities must respond quickly with a clear and convincing plan of action to restore confidence.

The Group of Thirty, formally known as "The Consultative Group on International Economic and Monetary Affairs, Inc." was founded in 1978. The Group of Thirty is a private, nonprofit, international body composed of senior representatives of the private and public sectors and academia. The Group aims to deepen understanding of international economic and financial issues, to explore the international repercussions of decisions taken in the public and private sectors and to examine the choices available to market practitioners and to policymakers. The Group is led by Paul A. Volcker, Chairman of Trustees, and Jacob A. Frenkel, Chairman of the Group.

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