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Banking Crisis

The Swedish model for resolving the banking crisis of 1991-93

Lars Jonung at the European Commission has released a new paper on this topic: you can download it here.

Abstract: This study presents the main features of the Swedish approach for resolving the banking crisis of 1991-93 by condensing them into seven policy lessons. These concern (1) the importance of political unity behind the resolution policy, (2) a government blanket guarantee of the financial obligations of the banking system, (3) swift policy action where acting early was more important than acting in exactly the right manner, (4) an adequate legal and institutional framework for the resolution procedures including open-ended public funding, (5) full disclosure of information by the parties involved, (6) a differentiated resolution policy minimizing moral hazard by forcing private sector participants to absorb losses before government financial intervention, and (7) the proper design of macroeconomic policies to simultaneously end the crisis in both the real economy and the financial sector.

1 reply on “The Swedish model for resolving the banking crisis of 1991-93”

Did ye notice the item in the footnote on the intro?

“The author’s experience as chief economic advisor to prime minister
Carl Bildt in 1992-94 is a source of inspiration for this paper.”

Is it just my cynicism or is that a bit backhanded?? As the chief econ advisor was he not the person who got this through, why the ‘inspiration’?? Or does he mean this caused me to write this paper, to tell ye how to do it….. if so isn’t that obvious?

Sorry for the deviation from the subject.

On the topic, is it possible at this stage for Ireland to ‘do a Sweden’ My experience of Sweden is that there is a broad political/economic consensus of long standing and even if the 1990s crisis was a deviation from that the way out of it was possible because of the concensus. IMO we don’t have the same level of political/economic agreement and recent moves have made the divisions between the various parties greater.

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