Bank failures study provides insights into current situation

[Ah Xoc Kin]

A 2004 Bank of International Settlements study on bank failures in mature economies:

http://www.bis.org/publ/bcbs_wp13.htm

some interesting findings:

--Failures can be classified in many ways, including by risk type, the type of shock that precipitated the failures or crisis, the state of the banking system, what portion of the banking system was affected, how the crisis was resolved, and whether the failures resulted in regulatory changes.

--Spain, Norway, Sweden and the U.S. had very similar experiences when they liberalised their financial systems.

--In countries where there were a significant number of failures, real estate lending played a major role. Credit risk, particularly real estate lending, led to widespread banking problems in Switzerland, Spain, the United Kingdom, Norway, Sweden, Japan and the U.S. Credit concentration risk, usually in real estate, was cited in nine out of the 13 episodes.

--Financial liberalisation (deregulation) was a common feature of major banking crises often combined with supervisory systems that were inadequately prepared for the change.

--Most of the widespread failures required some amount of public support, sometimes in very large amounts. All of the episodes that involved large amounts of public support were caused by credit risk problems.

--The widespread banking crises that involved credit risk were remarkably similar. A period of financial deregulation resulted in rapid growth in lending, particularly in real estate related lending. Rapidly rising real estate prices encouraged more lending, abetted by lax regulatory systems in many cases. When economic recessions occurred, inflated real estate prices collapsed, leading directly to the failures.

[RainDog]

1. k&r

thanks for this one. funny, huh, that what we already knew was true is, in fact, true.

what I find really amazing is that the right wing, which generally holds a conservative christian view of the world that all humans are sinners, born into sin and never free from temptation, find it a rational proposition to think that deregulation does not result in fraud - or that people will not pursue their own selfish ends without regard to anyone else.

but then again, conservatism in the U.S. is not rational.

[Hannah Bell]

2. It's very predictable, and since it's so predictable, you wonder why the ptb keep

enabling it, time after time after time.

Could it be because they want the freedom to steal, periodically?

[crispini]

3. kick

:kick: