A review of the experiences since 1980 of the 181 current Fund member countries reveals that 133 have experienced significant banking sector problems at some stage during the past fifteen years.11 This figure represents 73.5 percent of Fund member countries. A summary of the review is presented in Table 2. Two general classes are identified: “crisis” (41 instances in 36 countries) and “significant” problems (108 instances). There is some degree of judgment in these classifications, but in general, following Sundararajan and Balino (1991), we refer to cases where there were runs or other substantial portfolio shifts, collapses of financial firms, or massive government intervention, as crises. Extensive unsoundness short of a crisis is termed significant.
Table 2.
Survey of Banking Problems: 1980-Spring 19961
Under “Problems,” a blank space indicates that there was a problem but that it was neither “significant” nor a “crisis.” Years in parentheses denote the period of banking problems.
In 1995, fraud resulted in major losses and depositor runs at two institutions in Taiwan Province of China; one was taken over by a state-owned bank and the other supported by the central bank and a state-owned bank. The large state-owned banks are reported to have an overhang of bad loans to real estate projects.
From 1982-86, 16 Hong Kong banks and other deposit-taking institutions failed, were liquidated, or were taken over. The closure of the BCCI subsidiary in Hong Kong in 1991 led to minor runs on several local banks.
Table 2.
Survey of Banking Problems: 1980-Spring 19961
| Country | Type of Problem | Measure of Extent |
|---|---|---|
| Albania (1992–present) |
Significant | Thirty-one percent of “new” (post-July 1992 cleanup) loans are nonperforming; some banks are facing liquidity problems owing to a logjam of interbank liabilities. |
| Algeria (1990–92) |
Significant | Fifty percent of loans were nonperforming and were taken over by the treasury; operations covered all the 5 commercial banks, and were followed by ongoing structural reforms. |
| Angola (1991–present) |
Significant | The two-tier banking system (established in 1991) is still not consolidated; 2 commercial banks (state-owned) are experiencing solvency problems. |
| Argentina (1980–82) |
Crisis | Nine percent of loans were nonperforming in 1980 and 30% in 1985; 168 institutions were closed. |
| (1989–90) | Crisis | Nonperforming assets constituted 27% of the aggregate portfolio and 37% of the portfolios of state-owned banks. Failed banks held 40% of financial system assets. |
| (January to September 1995) | Crisis | Through September 1995, 45 of 205 institutions were closed or merged. |
| Armenia (1994–present) |
Significant | The central bank has closed half of the active banks since August 1994, but the nonperforming asset problem of the large banks remains to be tackled. The Savings Bank has negligible capital. |
| Australia (1989–92) |
Significant | Nonperforming loans rose to 6% of total assets in 1991-92. State-owned banks, especially in Victoria and South Australia, had to be rescued at a cost to the state governments of 1.9% of GDP. A large building society failed. |
| Azerbaijan (1995–present) |
Significant | One large state-owned bank is facing a serious liquidity problem; new management has been appointed; 12 private banks have been closed owing to noncompliance with regulations; 3 large state-owned banks will be insolvent if loan losses are written off. |
| Bahrain | The system withstood deposit withdrawals from the offshore center during the Persian Gulf war. | |
| Bangladesh (1980s–present) |
Significant | In 1987, 20% of the loans of 4 major banks, whose assets accounted for 70% of all lending, were nonperforming. |
| Belarus (1995–present) |
Significant | Many banks are undercapitalized; forced mergers have burdened some banks with poor loan portfolios; the regulatory environment is uncertain. |
| Benin (1988) |
Crisis | All three commercial banks collapsed; 78% of loans were nonperforming at the end of 1988. |
| Bhutan (Early 1990s–present) |
Significant | Nonperforming loans amount to approximately 7% of total loans. |
| Bolivia (1986–87) |
Significant | Nonperforming loans reached 30% of banking assets. |
| (1994–present) | Significant | Two banks with 11% of assets were closed in November 1994. Four of 15 domestic banks, with 30% of assets, were undercapitalized and had liquidity problems and high levels of nonperforming loans in 1995. |
| Bosnia-Herzegovina (1992–present) |
Significant | There has been no major bank closure. Loans made in the late 1980s and early 1990s are in default owing to the breakup of the former Yugoslavia and the war; this also translates into unrepayable commercial bank debt to international lenders. |
| Botswana (1994–95) |
Significant | One problem bank was merged in 1994, a small bank was liquidated in 1995, and the state-owned National Development Bank was recapitalized at a cost of 0.6% of GDP. |
| Brazil (1994–present) |
Significant | Twenty-nine banks, holding 15.4% of total deposits, were subjected to official intervention, placed under special administration, or received assistance to merge. |
| Brunei Darussalam (Mid-1980s) |
Significant | Several financial firms failed in the mid-1980s. The second largest bank failed in 1986. In 1991, 9% of loans were past due; the level of such loans has subsequently declined. |
| Bulgaria (1991–present) |
Crisis | About 75% of nongovernment loans were nonperforming in 1995, leaving many banks insolvent. Runs on banks have been reflected in pressure on reserve money and a queue of unsettled interbank payments. |
| Burkina Faso (1988–94) |
Significant | Thirty-four percent of loans were nonperforming. |
| Burundi (1994–present) |
Significant | Twenty-five percent of loans were nonperforming in 1995; one bank was liquidated. |
| Cambodia (Ongoing) |
Significant | Commercial banks have rapidly expanded in the past two years. A number of banks do not meet prudential regulations. As supervisory capacity is rudimentary, there is no current information on the quality of the banks’ portfolios. |
| Cameroon (1989–93) |
Crisis | In 1989, 60-70% of loans were nonperforming. |
| (1995–present) | Crisis | About 30% of loans were nonperforming in 1996. |
| Canada (1983–85) |
Significant | Fifteen members of the Canadian Deposit Insurance Corporation, including 2 banks, failed. |
| Cape Verde (1993–present) |
Significant | In September 1993, the central bank was separated from the principal commercial bank. An estimated 30% of loans of the commercial bank were nonperforming at the end of 1995. This is in addition to nonperforming loans of public enterprises amounting to about 7% of GDP that remained with the central bank and were transferred to the government in September 1994. |
| Central African Republic (1976–92) |
Crisis | Four banks were liquidated. |
| (1995–present) | Significant | Forty percent of loans are nonperforming; one state-owned bank is being taken over by a private group. |
| Chad (1979–83) |
Crisis | Full banking operations were resumed after the 1979 civil war, with a moratorium on some loans and deposits. |
| (1992) | Significant | Thirty-five percent of loans to the private sector were nonperforming. The central bank consolidated those loans held by the 3 main commercial banks. |
| Chile (1981–87) |
Crisis | The authorities intervened in 4 banks and 4 nonbank financial institutions (with 33% of outstanding loans) in 1981; 9 other banks and 2 more nonbanks (with 45% of outstanding loans) were subject to intervention in 1982–83, and many others were assisted. At the end of 1983, 19% of loans were nonperforming. |
| China2 (1980s-present) |
Significant | Problems have been recognized, but their size is very unclear; official estimates suggest that between 10% and 20% of bank loans could be nonperforming. |
| Colombia (1982–85) |
Significant | The authorities intervened in 6 major banks and 8 finance companies. 15% of loans were nonperforming in 1984–85 (5.5% in 1980, 6.6% in 1988). Some insolvent banks were nationalized in 1985-86. |
| Congo, Republic of(1994–present) |
Crisis | Seventy-five percent of loans to the private sector are nonperforming; 2 state-owned banks are being liquidated and 2 other state-owned banks are being privatized. |
| Costa Rica (Mid-1994-present) |
Significant | One large state-owned commercial bank was closed in December 1994. The ratio of overdue loans (net of provisions) to net worth in state commercial banks exceeded 100% in June 1995. |
| Côte d’ lvoire (1988–90) |
Significant | Five specialized financial institutions and one commercial bank were restructured. Nonperforming loans reached 12% of bank credit. |
| Croatia (1995) |
Significant | Banks accounting for 47% of bank credit have been found to be unsound and have been, or are scheduled to be, taken over by the Bank Rehabilitation Agency during 1996. |
| Czech Republic (1991–present) |
Significant | In 1994-95, 38% of loans were nonperforming. Several banks have been closed since 1993. |
| Denmark (1987–92) |
Significant | Cumulative loan losses over the period 1990-92 were 9% of loans; 40 of the 60 problem banks were merged. |
| Djibouti (1991–93) |
Significant | Two of 6 commercial banks ceased operations in 1991 and 1992; their bankruptcy is being finalized. Another bank experienced difficulties. |
| Dominican Republic (1992–present) |
Significant | More than 5% of the total loans of the financial system are estimated to be nonperforming. In the past three years, 3 small banks have been liquidated. In April 1996, the Monetary Board intervened in the third largest bank, which represents 7% of the assets of the banking system. |
| Ecuador (1995–present) |
Significant | High levels of nonperforming loans; the authorities intervened in several smaller financial institutions in late 1995 to early 1996 and in the fifth largest commercial bank in March 1996. |
| Egypt (1991–95) |
Significant | Four main public sector banks were given capital assistance. |
| El Salvador (1989) |
Significant | Nine state-owned commercial banks (later privatized between 1991 and 1993) had 37% of loans nonperforming in 1989. |
| Equatorial Guinea (1983–85) |
Crisis | Two of the country’s largest banks were liquidated. |
| (1995) | Significant | The principal bank’s main shareholder has been placed in liquidation. |
| Eritrea (1994) |
Significant | State-owned banks were undercapitalized, but information on the quality of bank portfolios is scarce. |
| Estonia (1992–95) |
Crisis | Insolvent banks held 41% of banking system assets. The licenses of 5 banks have been revoked, 2 major banks were merged and nationalized, and 2 large banks were merged and converted to a loan-recovery agency. |
| Ethiopia (1994–95) |
Significant | A government-owned bank was restructured, and its nonperforming loans were taken over by the government. |
| Fiji (1995–present) |
Significant | Ten percent of the loans are nonperforming. The problems are concentrated in one large bank that has 30% nonperforming loans. |
| Finland (1991–94) |
Crisis | Nonperforming loans and credit losses reached 13% of total exposure at their peak in 1992; there was a liquidity crisis in September 1991. |
| France (1991–95) |
Significant | Nonperforming loans were 8.9% of total loans in 1994. Fifteen percent ($27 billion) of Credit Lyonnais’ loans were nonperforming, and some other banks have posted large losses. |
| Gabon (1995–present) |
Significant | Nine percent of loans are nonperforming; one bank was temporarily closed in 1995. |
| Gambia, The(1985–92) |
Significant | Ten percent of bank credit was nonperforming in 1992. A government bank was restructured and privatized in 1992. |
| Georgia (1991–present) |
Significant | About a third of banks’ outstanding loans are nonperforming; most large banks would be insolvent if adequate provisions were made for all nonperforming assets. |
| Germany (1990–93) |
Significant | There were major problems at state-owned banks in East Germany following unification. The costs were handled by an extrabudgetary fund. |
| Ghana (1983–89) |
Significant | Forty percent of bank credit to nongovernment borrowers was nonperforming in 1989; one bank was closed and two were merged. |
| Greece (1991–95) |
Significant | There were localized problems that required significant injections of public funds into specialized lending institutions. |
| Guatemala | Two small state-owned banks had high nonperforming assets; these banks discontinued operations in the early 1990s. | |
| Guinea (1980–85) |
Crisis | The state-owned banking system collapsed; 80% of loans were nonperforming. |
| Guinea-Bissau (Ongoing) |
Significant | After transition to a system in which the central bank and private commercial banks operate separately, sizable nonperforming loans (equivalent to 3.5% of GDP) were assumed by the treasury in early 1996. |
| (1988–present) | Significant | In August 1995, 26% of loans were nonperforming. |
| Guyana (1993–95) |
Significant | One public bank was liquidated and merged with another public bank, holding more than one third of financial sector deposits. The surviving bank is to be restructured because of high levels of nonperforming loans. In 1993-94, US$28 million (approximately 7% of GDP) in nonperforming loans were written off. |
| Haiti (1991-present) |
Significant | The political situation in 1994 resulted in a disruption of normal banking and a run on banks. |
| Hungary (1987-present) |
Significant | Eight banks, accounting for 25% of financial system assets, became insolvent. At the end of 1993, 23% of total loans were problematic. |
| Iceland (1985–86) |
Significant | One of three state-owned banks became insolvent and was eventually privatized in a merger with 3 private banks. |
| (1993) | Significant | The government was forced to inject capital into one of the largest state-owned commercial banks after it had suffered serious loan losses. |
| India (1991–present) |
Significant | The nonperforming domestic assets of the 27 public sector banks were estimated at 19.5% of total loans and advances of these banks as of the end of March 1995. At that time, 15 banks did not meet Basle capital adequacy standards. |
| Indonesia (1992–present) |
Significant | Nonperforming loans, which were concentrated in state-owned banks, were over 25% of total lending in 1993 but declined to 12% in September 1995. A large private bank was closed in 1992. |
| Ireland (1985) |
Significant | One of the four clearing banks wrote off one fourth of its capital when its insurance subsidiary sustained losses and was placed under administration. |
| Israel (1983–84) |
Significant | The government nationalized major banks accounting for 90% of the market; there had been an undercapitalization problem exacerbated by a crisis in the stock market. |
| Italy (1990–95) |
Significant | Problems were concentrated in the south, affecting particular institutions. Systemwide, nonperforming loans were 10% of total in 1995. During 1990-94, 58 banks (accounting for 11% of total lending) were in difficulties and were merged with other institutions, and 3 of the 10 largest banks received significant injections of public funds; 10 banks were undercapitalized in 1994. |
| Jamaica (1994–present) |
Significant | A merchant banking group was closed in December 1994; a medium-sized bank was supported in 1995. |
| Japan (1992–present) |
Significant | In early 1996, the Ministry of Finance estimated problem loans at around 8% of GDP. |
| Jordan (1989–90) |
Crisis | The third largest bank collapsed in August 1989; six other financial institutions encountered difficulties. The central bank provided overdrafts equivalent to 10% of GDP to meet a run on deposits and allow banks to settle foreign obligations. |
| Kazakstan (1991–95) |
Significant | Forty percent of assets are to be written off; 80% of banks would be insolvent if all loan losses were written off. |
| Kenya (1993) |
Significant | About 66% of loans of one third of the commercial banks were nonperforming. The local subsidiary of Meridien BIAO was closed in 1995 with little spillover. |
| Korea (Mid-1980s) |
Significant | Nonperforming loans of deposit money banks rose significantly in the first half of the 1980s, exceeding 7% of total assets in 1986. The ratio of nonperforming loans to total assets declined subsequently to 0.9% in 1995. |
| Kuwait (Mid-1980s) |
Crisis | There was a banking collapse associated with problems in the informal stock market. An estimated 40% of loans were nonperforming in 1986. |
| (1990–91) | Significant | A large part of the private sector’s loan portfolio became nonperforming due to the loss of property and collateral. |
| Kyrgyz Republic (Ongoing) |
Significant | Eighty to ninety percent of all loans are doubtful; 4 small commercial banks were closed in the past year and 2 large state banks are facing problems. |
| Lao People’s Democratic Republic (Early 1990s) |
Significant | Nonperforming loans dominated the portfolios of the state-owned commercial banks. In 1994, these banks were recapitalized with an injection of cash and bonds equivalent to 1.5% of GDP. |
| Latvia (1995–present) |
Crisis | Two thirds of audited banks recorded losses in 1994. Eight bank licenses were revoked in 1994 and 15 more were revoked during the first seven months of 1995. The subsequent closure of the largest bank (with 30% of deposits) and two other major banks triggered a banking crisis in the spring of 1995. |
| Lebanon (1988–90) |
Crisis | Four banks became insolvent; 11 banks had to resort to central bank lending. |
| Lesotho (1988–present) |
Significant | Of 4 commercial banks, 1 that serves mostly the agricultural sector and has only a small share of bank assets has had a large portfolio of nonperforming loans. Banking services were disrupted for two months in 1991 owing to a strike. |
| Liberia (1991–95) |
Crisis | Seven out of 11 banks are not operational; their assets were equivalent to 60% of total bank assets at mid-1995. |
| Lithuania (1995–present) |
Crisis | Of 25 banks, 12 small ones are being liquidated and 4 larger ones do not meet the capital adequacy requirements. The fourth largest bank was closed. The operations of 2 banks, which accounted for 1 5% of deposits, were supported in 1995. |
| Macedonia, former Yugoslav Republic of (1993–94) |
Crisis | Seventy percent of loans were nonperforming. The government took responsibility for banks’ foreign debts and closed the second largest bank. |
| Madagascar (1988) |
Significant | Five major banks had nonperforming loans ranging from 45% to 75% of their portfolios. |
| (1991–95) | Significant | There were severe management problems in the 2 remaining state-owned banks. Loan losses resulted in reserve deficiencies and the need for substantial provisions in 1994. |
| Malaysia (1985–88) |
Crisis | The largest domestic bank wrote off nonperforming loans equivalent to approximately 1.4% of GDP in 1983. Nonperforming loans were estimated at 32% of total loans in 1988. |
| Mali (1987–89) |
Significant | The largest bank was nearly illiquid, with 75% of its loans nonperforming; it was restructured in 1989 with equity injection and government loan guarantees. |
| (1995) | Significant | The government made an “equity” loan to strengthen the capital of one bank following the collapse of Meridien Bank. |
| Mauritania (1991–93) |
Significant | The Development Bank ceased operations and was liquidated in 1994; 3 of the 4 commercial banks required substantial recapitalization. |
| Mauritius | The central bank closed 2 of 12 commercial banks for fraud and other irregularities in 1996. | |
| Mexico (1982) |
Crisis | The government took over the troubled banking system. |
| (1994–present) | Crisis | The ratio of nonperforming to total loans rose from 9% at the end of 1994 to 12% in December 1995. The authorities intervened in 2 banks in September 1994 and 4 of the remaining 35 banks (holding 17.5% of total end-1994 assets) in 1995. An additional 2 were taken under the administration of FOBAPROA (the deposit insurance agency). The overall cost of the several programs to support the banking system is estimated (in present value) at 6.5% of GDP. |
| Moldova (1994–present) |
Significant | A significant stock of nonperforming assets has built up in most banks, largely resulting from earlier directed credits. Audits of the 4 largest banks will help quantify the extent of the problem. |
| Mongolia (1991–present) |
Significant | Twenty-five percent of loans were nonperforming in 1995. |
| Mozambique (1988–93) |
Significant | Most of the loans outstanding at the end of 1988 were written off with central bank assistance. |
| (1994–95) | Significant | The 2 dominant state-owned banks became increasingly dependent on central bank support, pending privatization. |
| Myanmar (Ongoing) |
Significant | The banking system is dominated by 4 state-owned commercial banks, the largest of which is experiencing heavy losses and has a large portfolio of nonperforming loans. The other state-owned banks are widely recognized to be undercapitalized, but information on the quality of these banks’ portfolios is scarce. |
| Nepal (Late 1980s–present) |
Significant | Official estimates indicate that nonperforming loans amount to between 10% and 15% of total loans in the two large public banks, which account for nearly 70% of total bank deposits. |
| Netherlands | Banks overcame problems with mortgage loans in the late 1970s. | |
| New Zealand (1989–90) |
Significant | Of 4 large banks, 1 that was state-owned and accounted for one fourth of banking assets required a capital injection of almost 1% of GDP because of bad loan problems. |
| Nicaragua (Late 1980s–present) |
Significant | Two large state-owned banks have had longstanding financial problems. About 50% of loans are nonperforming. |
| Niger (1983–present) |
Crisis | In the mid-1980s, 50% of loans were nonperforming. Four banks were liquidated and 3 restructured in the late 1980s. Reform was initiated in 1987-90, and the restructuring process is still under way. |
| Nigeria (1991–95) |
Significant | In 1991, 77% of loans were nonperforming. Of 115 banks, 34, accounting for 10% of deposits, were technically insolvent at the end of 1994. |
| Norway (1987–93) |
Crisis | Six percent of commercial bank loans were nonperforming. Heavy losses and insolvencies led to a crisis at the end of 1991. The government became the principal owner of the three largest banks, whose share of total commercial bank assets was approximately 85%. |
| Pakistan (1980–present) |
Significant | Nonperforming loans are estimated to be 10% of bank assets. |
| Panama (1988–89) |
Crisis | A bank holiday that lasted for nine weeks was declared in March 1988. As a result of uncertainty and loss of confidence caused by a political crisis, the public banks were particularly affected by a loss of deposits and a rapid deterioration in their loan portfolios that stemmed from poor lending decisions and the sharp contraction of the economy. The financial position of most commercial banks also weakened, and 15 banks ceased operations. |
| Papua New Guinea (1989–present) |
Significant | A severe economic downturn in 1989 led sharp increases in loan losses at commercial banks. Eighty-five percent of the savings and loan associations ceased operations as a result of the economic problems, mismanagement, or fraud. The public lost confidence in the banking system and withdrew deposits in 1994. |
| Paraguay (1995–present) |
Significant | The authorities invervened in institutions accounting for some 10% of financial system deposits during the summer of 1995. There have been interventions in 6 other financial institutions |
| since then. Depositor restitution and operations to facilitate borrowing by distressed institutions cost an estimated 4% of GDP by the end of 1995. | ||
| Peru (1983–90) |
Significant | Two large banks failed. There were high levels of nonperforming loans and financial disintermediation following nationalization of the banking system in 1987. |
| Philippines (1981–87) |
Crisis | Banks accounting for 1.6% of banking system assets failed in 1981. Through the mid-1980s, a number of institutions failed or were taken over by government financial institutions. Nonperforming assets of two state-owned institutions were transferred to a government agency. These assets accounted for nearly 30% of total banking assets. In 1986, 19% of loans were nonperforming. |
| Poland (1991–present) |
Significant | Sixteen percent loans were classified as losses, 22% as doubtful, and 24% as substandard in 1991. |
| Romania (1990–present) |
Significant | Five major state-owned commercial banks had 35% of their accrued interest receivables overdue as of June 30, 1994. |
| Russia (1992–present) |
Significant | Official estimates of loan arrears were 40% of total credit to the private sector at the end of 1995. |
| Rwanda (1991–present) |
Significant | There is a substantial amount of nonperforming loans. One bank, with a well-established network, has been closed. |
| Sao Tome and Principe (1980–present) |
Crisis | Over 90% of loans of the monobank were nonperforming in 1992. In 1993, a new central bank began operations. The commercial and development departments of the former monobank were liquidated, as was the only other financial institution. At the same time, 2 new banks were licensed and took over many of the assets of their predecessors. The credit operations of one newly created bank have been suspended since the end of 1994. |
| Senegal (1983–88) |
Crisis | In 1988, 50% of loans were nonperforming. Reform was implemented in 1988-91; 8 banks were liquidated and the remaining 8 were restructured. |
| Sierra Leone (1990–present) |
Significant | In 1995, 40-50% of loans were nonperforming. Recapitalization and restructuring is ongoing. The license of one bank was suspended in 1994. |
| Singapore | Nonperforming loans at domestic commercial banks reached 0.6% of GDP in 1982. | |
| Slovak Republic (1991–95) |
Significant | Loans classified as nonstandard were high at the end of August 1995. There were no runs or major bank closures, but all 5 major banks required government-sponsored restructuring operations. |
| Slovenia (1992–94) |
Significant | Three banks, with two thirds of banking system assets, were restructured during this period. The percentage of bad loans is not known. Bank rehabilitation was completed in 1995. |
| Somalia (1990) |
Crisis | There were nonperforming claims on both private and public sector borrowers during the civil unrest. |
| South Africa (1985) |
Crisis | Banks built up large short-term foreign liabilities owing to high domestic interest rates. When foreign banks began to reduce their exposure, in part owing to political factors, the exchange depreciation and liquidity squeeze on banks resulted in an official moratorium on external capital repayments. |
| (1989-present) | In 1989-90, one major bank, which held about 15% of banking assets, was recapitalized and reorganized after suffering loan losses and management problems. Since 1991, several small banks have been liquidated or put into curatorship, with no systemic repercussions. | |
| Spain (1977–85) |
Crisis | From 1978 through 1982, 110 banks, accounting for 20% of deposits, were rescued. In addition, in 1983 one group that controlled 100 enterprises and 20 banks was nationalized. |
| Sri Lanka (Early 1990s) |
Significant | Thirty-five percent of the portfolios of the two state-owned commercial banks, which accounted for over 60% of banking system assets, were nonperforming. In March 1993, bonds equivalent to 4.8% of GDP were issued to recapitalize these banks. |
| St. Vincent and the Grenadines (1994–present) |
Significant | The only domestic bank is a state-owned commercial bank, which accounts for 30% of deposits. About 10% of its assets are nonperforming. |
| Sudan | Smaller banks are being encouraged to merge with larger banks to ensure compliance with the Basle capital standards before June 1997. | |
| Swaziland (1995) |
Significant | Meridien BIAO Swaziland was taken over by the central bank. The central bank also took over the |
| Swaziland Development and Savings Bank (SDSB), which faced severe portfolio problems; the government is now expected to sign an agreement that will allow a foreign bank to take over the management of the SDSB. | ||
| Sweden (1990–93) |
Crisis | Eighteen percent of total unconsolidated bank loans were reported lost and the two main banks were assisted. |
| Tajikistan (Ongoing) |
Significant | One of the largest banks is insolvent; 1 small bank has been closed and another (out of 17) is in the process of liquidation. |
| Tanzania (1988–present) |
Crisis | State-owned commercial banks, accounting for over 95% of the system, were insolvent. At the end of 1994, 60% to 80% of all loans were nonperforming and the losses of the largest bank were equivalent to 70% of deposits. |
| Thailand (1983–87) |
Crisis | Fifteen percent of bank assets were nonperforming. There were runs during the crisis of 1983-85 and 15 finance companies failed. More than 25% of the financial system’s assets were affected. |
| Togo (1989–91) |
Significant | One of 10 commercial banks with 7% of bank credit was insolvent and liquidated and its credits were taken over by the government. |
| Trinidad and Tobago (Early 1982–93) |
Significant | The banking sector expanded rapidly in the mid-1970s in a time of lax supervisory and prudential controls. With the onset of the general downturn in the economy in the early 1980s, some financial institutions experienced solvency problems, resulting in the merging of three government-owned banks in 1993 as an intermediate stage to the planned privatization of the merged bank. |
| Tunisia (1991–95) |
Significant | Introduction of new loan classification and provisioning standards and capital adequacy requirements in 1991, coupled with extensive portfolio audits in 1992, made clear that most commercial banks were undercapitalized. (State-owned banks accounted for over 65% of total lending.) From 1991 to 1994, the banking system raised equity equivalent to 1.5% of GDP and made provisions equivalent to another 1.5%. Thus recapitalization through 1994 required at least 3% of GDP, and some banks remained undercapitalized; recapitalization continued through 1996. |
| Turkey (1982) |
Crisis | Several small banks and most brokerage houses collapsed. |
| (1991) | Crisis | The start of the Persian Gulf war led to bank runs. |
| (1994) | Significant | Depositor runs in the spring of 1994 resulted in the closure of 3 medium-sized banks. To stem further runs, the government introduced full deposit insurance in May 1994. |
| Uganda (1990–present) |
Significant | A small bank failed in early 1993. Several other banks are in difficulty or insolvent, including state-owned banks accounting for more than 40% of banking system assets. |
| Ukraine (1994–present) |
Significant | In 1994, many banks did not meet capital and other prudential requirements. Audits indicated that one of the five largest banks was insolvent. Approximately 30% of loans outstanding were in arrears. The authorities intervened at 20 small to medium-sized banks in 1995. |
| United Kingdom3 | No systemic problems, but several notable bank failures, including Johnson Matthey (1984), Bank of Credit and Commerce International (1991), and Barings (1995), have occurred. | |
| United States (1980–92) |
Significant | During the period, 1,142 savings and loan (S&L) associations and 1,395 banks were closed; 4.1% of commercial bank loans were nonperforming in 1987. |
| Uruguay (1981–85) |
Crisis | Eleven percent of loans were nonperforming in 1982, 59% in 1986. |
| Uzbekistan (1993–present) |
Significant | Almost 10% of loans were reported to be overdue in October 1995. |
| Venezuela (1994–present) |
Crisis | In 1993, before the crisis started, 8.5% of loans were reported as nonperforming. The authorities intervened in 13 of 47 banks, which held 50% of deposits, in 1994, and 5 additional banks in 1995. Support by the government and the central bank to the banking system amounted to almost 17% of GDP in 1994–95. |
| Vietnam (Ongoing) |
Significant | State-owned banks are widely recognized to be undercapitalized, but information on the quality of their portfolios remains scarce. |
| Yemen Arab Republic (Ongoing) |
Significant | Banks have extensive nonperforming loans and heavy foreign currency exposure. |
| Zaïre (1991–present) |
Significant | Four state-owned banks are insolvent; a fifth bank is to be recapitalized with private participation. |
| Zambia (1994–present) |
Significant | One of the largest commercial banks, the local Meridien BIAO subsidiary, failed in early 1995 and received official support equivalent to approximately 1.5% of GDP. Two small banks failed in late 1995, and several others are fragile. |
| Zimbabwe (1995–present) |
Significant | Two of the 5 commercial banks are unable to meet their statutory reserve requirements owing to a high percentage of nonperforming loans. |
Under “Problems,” a blank space indicates that there was a problem but that it was neither “significant” nor a “crisis.” Years in parentheses denote the period of banking problems.
In 1995, fraud resulted in major losses and depositor runs at two institutions in Taiwan Province of China; one was taken over by a state-owned bank and the other supported by the central bank and a state-owned bank. The large state-owned banks are reported to have an overhang of bad loans to real estate projects.
From 1982-86, 16 Hong Kong banks and other deposit-taking institutions failed, were liquidated, or were taken over. The closure of the BCCI subsidiary in Hong Kong in 1991 led to minor runs on several local banks.
Table 2.
Survey of Banking Problems: 1980-Spring 19961
| Country | Type of Problem | Measure of Extent |
|---|---|---|
| Albania (1992–present) |
Significant | Thirty-one percent of “new” (post-July 1992 cleanup) loans are nonperforming; some banks are facing liquidity problems owing to a logjam of interbank liabilities. |
| Algeria (1990–92) |
Significant | Fifty percent of loans were nonperforming and were taken over by the treasury; operations covered all the 5 commercial banks, and were followed by ongoing structural reforms. |
| Angola (1991–present) |
Significant | The two-tier banking system (established in 1991) is still not consolidated; 2 commercial banks (state-owned) are experiencing solvency problems. |
| Argentina (1980–82) |
Crisis | Nine percent of loans were nonperforming in 1980 and 30% in 1985; 168 institutions were closed. |
| (1989–90) | Crisis | Nonperforming assets constituted 27% of the aggregate portfolio and 37% of the portfolios of state-owned banks. Failed banks held 40% of financial system assets. |
| (January to September 1995) | Crisis | Through September 1995, 45 of 205 institutions were closed or merged. |
| Armenia (1994–present) |
Significant | The central bank has closed half of the active banks since August 1994, but the nonperforming asset problem of the large banks remains to be tackled. The Savings Bank has negligible capital. |
| Australia (1989–92) |
Significant | Nonperforming loans rose to 6% of total assets in 1991-92. State-owned banks, especially in Victoria and South Australia, had to be rescued at a cost to the state governments of 1.9% of GDP. A large building society failed. |
| Azerbaijan (1995–present) |
Significant | One large state-owned bank is facing a serious liquidity problem; new management has been appointed; 12 private banks have been closed owing to noncompliance with regulations; 3 large state-owned banks will be insolvent if loan losses are written off. |
| Bahrain | The system withstood deposit withdrawals from the offshore center during the Persian Gulf war. | |
| Bangladesh (1980s–present) |
Significant | In 1987, 20% of the loans of 4 major banks, whose assets accounted for 70% of all lending, were nonperforming. |
| Belarus (1995–present) |
Significant | Many banks are undercapitalized; forced mergers have burdened some banks with poor loan portfolios; the regulatory environment is uncertain. |
| Benin (1988) |
Crisis | All three commercial banks collapsed; 78% of loans were nonperforming at the end of 1988. |
| Bhutan (Early 1990s–present) |
Significant | Nonperforming loans amount to approximately 7% of total loans. |
| Bolivia (1986–87) |
Significant | Nonperforming loans reached 30% of banking assets. |
| (1994–present) | Significant | Two banks with 11% of assets were closed in November 1994. Four of 15 domestic banks, with 30% of assets, were undercapitalized and had liquidity problems and high levels of nonperforming loans in 1995. |
| Bosnia-Herzegovina (1992–present) |
Significant | There has been no major bank closure. Loans made in the late 1980s and early 1990s are in default owing to the breakup of the former Yugoslavia and the war; this also translates into unrepayable commercial bank debt to international lenders. |
| Botswana (1994–95) |
Significant | One problem bank was merged in 1994, a small bank was liquidated in 1995, and the state-owned National Development Bank was recapitalized at a cost of 0.6% of GDP. |
| Brazil (1994–present) |
Significant | Twenty-nine banks, holding 15.4% of total deposits, were subjected to official intervention, placed under special administration, or received assistance to merge. |
| Brunei Darussalam (Mid-1980s) |
Significant | Several financial firms failed in the mid-1980s. The second largest bank failed in 1986. In 1991, 9% of loans were past due; the level of such loans has subsequently declined. |
| Bulgaria (1991–present) |
Crisis | About 75% of nongovernment loans were nonperforming in 1995, leaving many banks insolvent. Runs on banks have been reflected in pressure on reserve money and a queue of unsettled interbank payments. |
| Burkina Faso (1988–94) |
Significant | Thirty-four percent of loans were nonperforming. |
| Burundi (1994–present) |
Significant | Twenty-five percent of loans were nonperforming in 1995; one bank was liquidated. |
| Cambodia (Ongoing) |
Significant | Commercial banks have rapidly expanded in the past two years. A number of banks do not meet prudential regulations. As supervisory capacity is rudimentary, there is no current information on the quality of the banks’ portfolios. |
| Cameroon (1989–93) |
Crisis | In 1989, 60-70% of loans were nonperforming. |
| (1995–present) | Crisis | About 30% of loans were nonperforming in 1996. |
| Canada (1983–85) |
Significant | Fifteen members of the Canadian Deposit Insurance Corporation, including 2 banks, failed. |
| Cape Verde (1993–present) |
Significant | In September 1993, the central bank was separated from the principal commercial bank. An estimated 30% of loans of the commercial bank were nonperforming at the end of 1995. This is in addition to nonperforming loans of public enterprises amounting to about 7% of GDP that remained with the central bank and were transferred to the government in September 1994. |
| Central African Republic (1976–92) |
Crisis | Four banks were liquidated. |
| (1995–present) | Significant | Forty percent of loans are nonperforming; one state-owned bank is being taken over by a private group. |
| Chad (1979–83) |
Crisis | Full banking operations were resumed after the 1979 civil war, with a moratorium on some loans and deposits. |
| (1992) | Significant | Thirty-five percent of loans to the private sector were nonperforming. The central bank consolidated those loans held by the 3 main commercial banks. |
| Chile (1981–87) |
Crisis | The authorities intervened in 4 banks and 4 nonbank financial institutions (with 33% of outstanding loans) in 1981; 9 other banks and 2 more nonbanks (with 45% of outstanding loans) were subject to intervention in 1982–83, and many others were assisted. At the end of 1983, 19% of loans were nonperforming. |
| China2 (1980s-present) |
Significant | Problems have been recognized, but their size is very unclear; official estimates suggest that between 10% and 20% of bank loans could be nonperforming. |
| Colombia (1982–85) |
Significant | The authorities intervened in 6 major banks and 8 finance companies. 15% of loans were nonperforming in 1984–85 (5.5% in 1980, 6.6% in 1988). Some insolvent banks were nationalized in 1985-86. |
| Congo, Republic of(1994–present) |
Crisis | Seventy-five percent of loans to the private sector are nonperforming; 2 state-owned banks are being liquidated and 2 other state-owned banks are being privatized. |
| Costa Rica (Mid-1994-present) |
Significant | One large state-owned commercial bank was closed in December 1994. The ratio of overdue loans (net of provisions) to net worth in state commercial banks exceeded 100% in June 1995. |
| Côte d’ lvoire (1988–90) |
Significant | Five specialized financial institutions and one commercial bank were restructured. Nonperforming loans reached 12% of bank credit. |
| Croatia (1995) |
Significant | Banks accounting for 47% of bank credit have been found to be unsound and have been, or are scheduled to be, taken over by the Bank Rehabilitation Agency during 1996. |
| Czech Republic (1991–present) |
Significant | In 1994-95, 38% of loans were nonperforming. Several banks have been closed since 1993. |
| Denmark (1987–92) |
Significant | Cumulative loan losses over the period 1990-92 were 9% of loans; 40 of the 60 problem banks were merged. |
| Djibouti (1991–93) |
Significant | Two of 6 commercial banks ceased operations in 1991 and 1992; their bankruptcy is being finalized. Another bank experienced difficulties. |
| Dominican Republic (1992–present) |
Significant | More than 5% of the total loans of the financial system are estimated to be nonperforming. In the past three years, 3 small banks have been liquidated. In April 1996, the Monetary Board intervened in the third largest bank, which represents 7% of the assets of the banking system. |
| Ecuador (1995–present) |
Significant | High levels of nonperforming loans; the authorities intervened in several smaller financial institutions in late 1995 to early 1996 and in the fifth largest commercial bank in March 1996. |
| Egypt (1991–95) |
Significant | Four main public sector banks were given capital assistance. |
| El Salvador (1989) |
Significant | Nine state-owned commercial banks (later privatized between 1991 and 1993) had 37% of loans nonperforming in 1989. |
| Equatorial Guinea (1983–85) |
Crisis | Two of the country’s largest banks were liquidated. |
| (1995) | Significant | The principal bank’s main shareholder has been placed in liquidation. |
| Eritrea (1994) |
Significant | State-owned banks were undercapitalized, but information on the quality of bank portfolios is scarce. |
| Estonia (1992–95) |
Crisis | Insolvent banks held 41% of banking system assets. The licenses of 5 banks have been revoked, 2 major banks were merged and nationalized, and 2 large banks were merged and converted to a loan-recovery agency. |
| Ethiopia (1994–95) |
Significant | A government-owned bank was restructured, and its nonperforming loans were taken over by the government. |
| Fiji (1995–present) |
Significant | Ten percent of the loans are nonperforming. The problems are concentrated in one large bank that has 30% nonperforming loans. |
| Finland (1991–94) |
Crisis | Nonperforming loans and credit losses reached 13% of total exposure at their peak in 1992; there was a liquidity crisis in September 1991. |
| France (1991–95) |
Significant | Nonperforming loans were 8.9% of total loans in 1994. Fifteen percent ($27 billion) of Credit Lyonnais’ loans were nonperforming, and some other banks have posted large losses. |
| Gabon (1995–present) |
Significant | Nine percent of loans are nonperforming; one bank was temporarily closed in 1995. |
| Gambia, The(1985–92) |
Significant | Ten percent of bank credit was nonperforming in 1992. A government bank was restructured and privatized in 1992. |
| Georgia (1991–present) |
Significant | About a third of banks’ outstanding loans are nonperforming; most large banks would be insolvent if adequate provisions were made for all nonperforming assets. |
| Germany (1990–93) |
Significant | There were major problems at state-owned banks in East Germany following unification. The costs were handled by an extrabudgetary fund. |
| Ghana (1983–89) |
Significant | Forty percent of bank credit to nongovernment borrowers was nonperforming in 1989; one bank was closed and two were merged. |
| Greece (1991–95) |
Significant | There were localized problems that required significant injections of public funds into specialized lending institutions. |
| Guatemala | Two small state-owned banks had high nonperforming assets; these banks discontinued operations in the early 1990s. | |
| Guinea (1980–85) |
Crisis | The state-owned banking system collapsed; 80% of loans were nonperforming. |
| Guinea-Bissau (Ongoing) |
Significant | After transition to a system in which the central bank and private commercial banks operate separately, sizable nonperforming loans (equivalent to 3.5% of GDP) were assumed by the treasury in early 1996. |
| (1988–present) | Significant | In August 1995, 26% of loans were nonperforming. |
| Guyana (1993–95) |
Significant | One public bank was liquidated and merged with another public bank, holding more than one third of financial sector deposits. The surviving bank is to be restructured because of high levels of nonperforming loans. In 1993-94, US$28 million (approximately 7% of GDP) in nonperforming loans were written off. |
| Haiti (1991-present) |
Significant | The political situation in 1994 resulted in a disruption of normal banking and a run on banks. |
| Hungary (1987-present) |
Significant | Eight banks, accounting for 25% of financial system assets, became insolvent. At the end of 1993, 23% of total loans were problematic. |
| Iceland (1985–86) |
Significant | One of three state-owned banks became insolvent and was eventually privatized in a merger with 3 private banks. |
| (1993) | Significant | The government was forced to inject capital into one of the largest state-owned commercial banks after it had suffered serious loan losses. |
| India (1991–present) |
Significant | The nonperforming domestic assets of the 27 public sector banks were estimated at 19.5% of total loans and advances of these banks as of the end of March 1995. At that time, 15 banks did not meet Basle capital adequacy standards. |
| Indonesia (1992–present) |
Significant | Nonperforming loans, which were concentrated in state-owned banks, were over 25% of total lending in 1993 but declined to 12% in September 1995. A large private bank was closed in 1992. |
| Ireland (1985) |
Significant | One of the four clearing banks wrote off one fourth of its capital when its insurance subsidiary sustained losses and was placed under administration. |
| Israel (1983–84) |
Significant | The government nationalized major banks accounting for 90% of the market; there had been an undercapitalization problem exacerbated by a crisis in the stock market. |
| Italy (1990–95) |
Significant | Problems were concentrated in the south, affecting particular institutions. Systemwide, nonperforming loans were 10% of total in 1995. During 1990-94, 58 banks (accounting for 11% of total lending) were in difficulties and were merged with other institutions, and 3 of the 10 largest banks received significant injections of public funds; 10 banks were undercapitalized in 1994. |
| Jamaica (1994–present) |
Significant | A merchant banking group was closed in December 1994; a medium-sized bank was supported in 1995. |
| Japan (1992–present) |
Significant | In early 1996, the Ministry of Finance estimated problem loans at around 8% of GDP. |
| Jordan (1989–90) |
Crisis | The third largest bank collapsed in August 1989; six other financial institutions encountered difficulties. The central bank provided overdrafts equivalent to 10% of GDP to meet a run on deposits and allow banks to settle foreign obligations. |
| Kazakstan (1991–95) |
Significant | Forty percent of assets are to be written off; 80% of banks would be insolvent if all loan losses were written off. |
| Kenya (1993) |
Significant | About 66% of loans of one third of the commercial banks were nonperforming. The local subsidiary of Meridien BIAO was closed in 1995 with little spillover. |
| Korea (Mid-1980s) |
Significant | Nonperforming loans of deposit money banks rose significantly in the first half of the 1980s, exceeding 7% of total assets in 1986. The ratio of nonperforming loans to total assets declined subsequently to 0.9% in 1995. |
| Kuwait (Mid-1980s) |
Crisis | There was a banking collapse associated with problems in the informal stock market. An estimated 40% of loans were nonperforming in 1986. |
| (1990–91) | Significant | A large part of the private sector’s loan portfolio became nonperforming due to the loss of property and collateral. |
| Kyrgyz Republic (Ongoing) |
Significant | Eighty to ninety percent of all loans are doubtful; 4 small commercial banks were closed in the past year and 2 large state banks are facing problems. |
| Lao People’s Democratic Republic (Early 1990s) |
Significant | Nonperforming loans dominated the portfolios of the state-owned commercial banks. In 1994, these banks were recapitalized with an injection of cash and bonds equivalent to 1.5% of GDP. |
| Latvia (1995–present) |
Crisis | Two thirds of audited banks recorded losses in 1994. Eight bank licenses were revoked in 1994 and 15 more were revoked during the first seven months of 1995. The subsequent closure of the largest bank (with 30% of deposits) and two other major banks triggered a banking crisis in the spring of 1995. |
| Lebanon (1988–90) |
Crisis | Four banks became insolvent; 11 banks had to resort to central bank lending. |
| Lesotho (1988–present) |
Significant | Of 4 commercial banks, 1 that serves mostly the agricultural sector and has only a small share of bank assets has had a large portfolio of nonperforming loans. Banking services were disrupted for two months in 1991 owing to a strike. |
| Liberia (1991–95) |
Crisis | Seven out of 11 banks are not operational; their assets were equivalent to 60% of total bank assets at mid-1995. |
| Lithuania (1995–present) |
Crisis | Of 25 banks, 12 small ones are being liquidated and 4 larger ones do not meet the capital adequacy requirements. The fourth largest bank was closed. The operations of 2 banks, which accounted for 1 5% of deposits, were supported in 1995. |
| Macedonia, former Yugoslav Republic of (1993–94) |
Crisis | Seventy percent of loans were nonperforming. The government took responsibility for banks’ foreign debts and closed the second largest bank. |
| Madagascar (1988) |
Significant | Five major banks had nonperforming loans ranging from 45% to 75% of their portfolios. |
| (1991–95) | Significant | There were severe management problems in the 2 remaining state-owned banks. Loan losses resulted in reserve deficiencies and the need for substantial provisions in 1994. |
| Malaysia (1985–88) |
Crisis | The largest domestic bank wrote off nonperforming loans equivalent to approximately 1.4% of GDP in 1983. Nonperforming loans were estimated at 32% of total loans in 1988. |
| Mali (1987–89) |
Significant | The largest bank was nearly illiquid, with 75% of its loans nonperforming; it was restructured in 1989 with equity injection and government loan guarantees. |
| (1995) | Significant | The government made an “equity” loan to strengthen the capital of one bank following the collapse of Meridien Bank. |
| Mauritania (1991–93) |
Significant | The Development Bank ceased operations and was liquidated in 1994; 3 of the 4 commercial banks required substantial recapitalization. |
| Mauritius | The central bank closed 2 of 12 commercial banks for fraud and other irregularities in 1996. | |
| Mexico (1982) |
Crisis | The government took over the troubled banking system. |
| (1994–present) | Crisis | The ratio of nonperforming to total loans rose from 9% at the end of 1994 to 12% in December 1995. The authorities intervened in 2 banks in September 1994 and 4 of the remaining 35 banks (holding 17.5% of total end-1994 assets) in 1995. An additional 2 were taken under the administration of FOBAPROA (the deposit insurance agency). The overall cost of the several programs to support the banking system is estimated (in present value) at 6.5% of GDP. |
| Moldova (1994–present) |
Significant | A significant stock of nonperforming assets has built up in most banks, largely resulting from earlier directed credits. Audits of the 4 largest banks will help quantify the extent of the problem. |
| Mongolia (1991–present) |
Significant | Twenty-five percent of loans were nonperforming in 1995. |
| Mozambique (1988–93) |
Significant | Most of the loans outstanding at the end of 1988 were written off with central bank assistance. |
| (1994–95) | Significant | The 2 dominant state-owned banks became increasingly dependent on central bank support, pending privatization. |
| Myanmar (Ongoing) |
Significant | The banking system is dominated by 4 state-owned commercial banks, the largest of which is experiencing heavy losses and has a large portfolio of nonperforming loans. The other state-owned banks are widely recognized to be undercapitalized, but information on the quality of these banks’ portfolios is scarce. |
| Nepal (Late 1980s–present) |
Significant | Official estimates indicate that nonperforming loans amount to between 10% and 15% of total loans in the two large public banks, which account for nearly 70% of total bank deposits. |
| Netherlands | Banks overcame problems with mortgage loans in the late 1970s. | |
| New Zealand (1989–90) |
Significant | Of 4 large banks, 1 that was state-owned and accounted for one fourth of banking assets required a capital injection of almost 1% of GDP because of bad loan problems. |
| Nicaragua (Late 1980s–present) |
Significant | Two large state-owned banks have had longstanding financial problems. About 50% of loans are nonperforming. |
| Niger (1983–present) |
Crisis | In the mid-1980s, 50% of loans were nonperforming. Four banks were liquidated and 3 restructured in the late 1980s. Reform was initiated in 1987-90, and the restructuring process is still under way. |
| Nigeria (1991–95) |
Significant | In 1991, 77% of loans were nonperforming. Of 115 banks, 34, accounting for 10% of deposits, were technically insolvent at the end of 1994. |
| Norway (1987–93) |
Crisis | Six percent of commercial bank loans were nonperforming. Heavy losses and insolvencies led to a crisis at the end of 1991. The government became the principal owner of the three largest banks, whose share of total commercial bank assets was approximately 85%. |
| Pakistan (1980–present) |
Significant | Nonperforming loans are estimated to be 10% of bank assets. |
| Panama (1988–89) |
Crisis | A bank holiday that lasted for nine weeks was declared in March 1988. As a result of uncertainty and loss of confidence caused by a political crisis, the public banks were particularly affected by a loss of deposits and a rapid deterioration in their loan portfolios that stemmed from poor lending decisions and the sharp contraction of the economy. The financial position of most commercial banks also weakened, and 15 banks ceased operations. |
| Papua New Guinea (1989–present) |
Significant | A severe economic downturn in 1989 led sharp increases in loan losses at commercial banks. Eighty-five percent of the savings and loan associations ceased operations as a result of the economic problems, mismanagement, or fraud. The public lost confidence in the banking system and withdrew deposits in 1994. |
| Paraguay (1995–present) |
Significant | The authorities invervened in institutions accounting for some 10% of financial system deposits during the summer of 1995. There have been interventions in 6 other financial institutions |
| since then. Depositor restitution and operations to facilitate borrowing by distressed institutions cost an estimated 4% of GDP by the end of 1995. | ||
| Peru (1983–90) |
Significant | Two large banks failed. There were high levels of nonperforming loans and financial disintermediation following nationalization of the banking system in 1987. |
| Philippines (1981–87) |
Crisis | Banks accounting for 1.6% of banking system assets failed in 1981. Through the mid-1980s, a number of institutions failed or were taken over by government financial institutions. Nonperforming assets of two state-owned institutions were transferred to a government agency. These assets accounted for nearly 30% of total banking assets. In 1986, 19% of loans were nonperforming. |
| Poland (1991–present) |
Significant | Sixteen percent loans were classified as losses, 22% as doubtful, and 24% as substandard in 1991. |
| Romania (1990–present) |
Significant | Five major state-owned commercial banks had 35% of their accrued interest receivables overdue as of June 30, 1994. |
| Russia (1992–present) |
Significant | Official estimates of loan arrears were 40% of total credit to the private sector at the end of 1995. |
| Rwanda (1991–present) |
Significant | There is a substantial amount of nonperforming loans. One bank, with a well-established network, has been closed. |
| Sao Tome and Principe (1980–present) |
Crisis | Over 90% of loans of the monobank were nonperforming in 1992. In 1993, a new central bank began operations. The commercial and development departments of the former monobank were liquidated, as was the only other financial institution. At the same time, 2 new banks were licensed and took over many of the assets of their predecessors. The credit operations of one newly created bank have been suspended since the end of 1994. |
| Senegal (1983–88) |
Crisis | In 1988, 50% of loans were nonperforming. Reform was implemented in 1988-91; 8 banks were liquidated and the remaining 8 were restructured. |
| Sierra Leone (1990–present) |
Significant | In 1995, 40-50% of loans were nonperforming. Recapitalization and restructuring is ongoing. The license of one bank was suspended in 1994. |
| Singapore | Nonperforming loans at domestic commercial banks reached 0.6% of GDP in 1982. | |
| Slovak Republic (1991–95) |
Significant | Loans classified as nonstandard were high at the end of August 1995. There were no runs or major bank closures, but all 5 major banks required government-sponsored restructuring operations. |
| Slovenia (1992–94) |
Significant | Three banks, with two thirds of banking system assets, were restructured during this period. The percentage of bad loans is not known. Bank rehabilitation was completed in 1995. |
| Somalia (1990) |
Crisis | There were nonperforming claims on both private and public sector borrowers during the civil unrest. |
| South Africa (1985) |
Crisis | Banks built up large short-term foreign liabilities owing to high domestic interest rates. When foreign banks began to reduce their exposure, in part owing to political factors, the exchange depreciation and liquidity squeeze on banks resulted in an official moratorium on external capital repayments. |
| (1989-present) | In 1989-90, one major bank, which held about 15% of banking assets, was recapitalized and reorganized after suffering loan losses and management problems. Since 1991, several small banks have been liquidated or put into curatorship, with no systemic repercussions. | |
| Spain (1977–85) |
Crisis | From 1978 through 1982, 110 banks, accounting for 20% of deposits, were rescued. In addition, in 1983 one group that controlled 100 enterprises and 20 banks was nationalized. |
| Sri Lanka (Early 1990s) |
Significant | Thirty-five percent of the portfolios of the two state-owned commercial banks, which accounted for over 60% of banking system assets, were nonperforming. In March 1993, bonds equivalent to 4.8% of GDP were issued to recapitalize these banks. |
| St. Vincent and the Grenadines (1994–present) |
Significant | The only domestic bank is a state-owned commercial bank, which accounts for 30% of deposits. About 10% of its assets are nonperforming. |
| Sudan | Smaller banks are being encouraged to merge with larger banks to ensure compliance with the Basle capital standards before June 1997. | |
| Swaziland (1995) |
Significant | Meridien BIAO Swaziland was taken over by the central bank. The central bank also took over the |
| Swaziland Development and Savings Bank (SDSB), which faced severe portfolio problems; the government is now expected to sign an agreement that will allow a foreign bank to take over the management of the SDSB. | ||
| Sweden (1990–93) |
Crisis | Eighteen percent of total unconsolidated bank loans were reported lost and the two main banks were assisted. |
| Tajikistan (Ongoing) |
Significant | One of the largest banks is insolvent; 1 small bank has been closed and another (out of 17) is in the process of liquidation. |
| Tanzania (1988–present) |
Crisis | State-owned commercial banks, accounting for over 95% of the system, were insolvent. At the end of 1994, 60% to 80% of all loans were nonperforming and the losses of the largest bank were equivalent to 70% of deposits. |
| Thailand (1983–87) |
Crisis | Fifteen percent of bank assets were nonperforming. There were runs during the crisis of 1983-85 and 15 finance companies failed. More than 25% of the financial system’s assets were affected. |
| Togo (1989–91) |
Significant | One of 10 commercial banks with 7% of bank credit was insolvent and liquidated and its credits were taken over by the government. |
| Trinidad and Tobago (Early 1982–93) |
Significant | The banking sector expanded rapidly in the mid-1970s in a time of lax supervisory and prudential controls. With the onset of the general downturn in the economy in the early 1980s, some financial institutions experienced solvency problems, resulting in the merging of three government-owned banks in 1993 as an intermediate stage to the planned privatization of the merged bank. |
| Tunisia (1991–95) |
Significant | Introduction of new loan classification and provisioning standards and capital adequacy requirements in 1991, coupled with extensive portfolio audits in 1992, made clear that most commercial banks were undercapitalized. (State-owned banks accounted for over 65% of total lending.) From 1991 to 1994, the banking system raised equity equivalent to 1.5% of GDP and made provisions equivalent to another 1.5%. Thus recapitalization through 1994 required at least 3% of GDP, and some banks remained undercapitalized; recapitalization continued through 1996. |
| Turkey (1982) |
Crisis | Several small banks and most brokerage houses collapsed. |
| (1991) | Crisis | The start of the Persian Gulf war led to bank runs. |
| (1994) | Significant | Depositor runs in the spring of 1994 resulted in the closure of 3 medium-sized banks. To stem further runs, the government introduced full deposit insurance in May 1994. |
| Uganda (1990–present) |
Significant | A small bank failed in early 1993. Several other banks are in difficulty or insolvent, including state-owned banks accounting for more than 40% of banking system assets. |
| Ukraine (1994–present) |
Significant | In 1994, many banks did not meet capital and other prudential requirements. Audits indicated that one of the five largest banks was insolvent. Approximately 30% of loans outstanding were in arrears. The authorities intervened at 20 small to medium-sized banks in 1995. |
| United Kingdom3 | No systemic problems, but several notable bank failures, including Johnson Matthey (1984), Bank of Credit and Commerce International (1991), and Barings (1995), have occurred. | |
| United States (1980–92) |
Significant | During the period, 1,142 savings and loan (S&L) associations and 1,395 banks were closed; 4.1% of commercial bank loans were nonperforming in 1987. |
| Uruguay (1981–85) |
Crisis | Eleven percent of loans were nonperforming in 1982, 59% in 1986. |
| Uzbekistan (1993–present) |
Significant | Almost 10% of loans were reported to be overdue in October 1995. |
| Venezuela (1994–present) |
Crisis | In 1993, before the crisis started, 8.5% of loans were reported as nonperforming. The authorities intervened in 13 of 47 banks, which held 50% of deposits, in 1994, and 5 additional banks in 1995. Support by the government and the central bank to the banking system amounted to almost 17% of GDP in 1994–95. |
| Vietnam (Ongoing) |
Significant | State-owned banks are widely recognized to be undercapitalized, but information on the quality of their portfolios remains scarce. |
| Yemen Arab Republic (Ongoing) |
Significant | Banks have extensive nonperforming loans and heavy foreign currency exposure. |
| Zaïre (1991–present) |
Significant | Four state-owned banks are insolvent; a fifth bank is to be recapitalized with private participation. |
| Zambia (1994–present) |
Significant | One of the largest commercial banks, the local Meridien BIAO subsidiary, failed in early 1995 and received official support equivalent to approximately 1.5% of GDP. Two small banks failed in late 1995, and several others are fragile. |
| Zimbabwe (1995–present) |
Significant | Two of the 5 commercial banks are unable to meet their statutory reserve requirements owing to a high percentage of nonperforming loans. |
Under “Problems,” a blank space indicates that there was a problem but that it was neither “significant” nor a “crisis.” Years in parentheses denote the period of banking problems.
In 1995, fraud resulted in major losses and depositor runs at two institutions in Taiwan Province of China; one was taken over by a state-owned bank and the other supported by the central bank and a state-owned bank. The large state-owned banks are reported to have an overhang of bad loans to real estate projects.
From 1982-86, 16 Hong Kong banks and other deposit-taking institutions failed, were liquidated, or were taken over. The closure of the BCCI subsidiary in Hong Kong in 1991 led to minor runs on several local banks.
As is evident from the table, several countries experienced repeated problems. In others there were problems in some banks that did not have a significant impact on either the functioning of the banking sector as a whole or the macroeconomy; information on 7 such cases was available and is recorded as well but not categorized as crisis or significant.