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Systemic Banking Crises Database: An Update

Author(s):
Fabian Valencia, and Luc Laeven
Published Date:
June 2012
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I. Introduction

It has been five years since the start of a global financial crisis that has given rise to the largest wave of banking crises seen since the Great Depression. Unlike previous crises over this period, the recent wave of crises has (thus far) affected mostly advanced economies. The effects of the crises are still lingering and in many cases the crisis is still ongoing.

This paper updates the banking crises database of Laeven and Valencia (2008), which was published prior to this recent wave of crises. The update adds information on recent crisis episodes, and presents descriptive statistics on the frequency of banking crises, their resolution, and their real effects. We show that some of the recent banking crises rank among the costliest crises in terms of fiscal outlays and output losses. In total, we identify 147 banking crises, of which 13 are borderline events, over the period 1970–2011. We also count 218 currency crises and 66 sovereign crises over this period.

We also collect data on policy responses for a subset of the 147 episodes identified, allowing for a comparison of the policy mix used to resolve banking crises. We find that monetary and fiscal policies are used more extensively during banking crises in advanced economies than in emerging and developing countries. One explanation is that advanced economies have better financing options to use countercyclical fiscal policy and generally have more space to use monetary policy. Consistent with the greater reliance on macroeconomic policies in advanced economies, we find that fiscal outlays associated with financial sector interventions (including bank recapitalization with public funds) in advanced economies are about half that in emerging and developing countries, despite relatively larger banking systems in advanced economies.

In terms of the real effects of banking crises, we find that advanced economies tend to experience larger output losses and increases in public debt than emerging and developing countries. These larger output losses in advanced economies are to some extent driven by deeper banking systems, which makes a banking crisis more disruptive (Kroszner, Laeven, and Klingebiel, 2007). The relatively larger increase in public debt in advanced economies is related to larger output losses and a greater use of countercyclical fiscal policy. Although expansionary macroeconomic policies indirectly support banks by enhancing their growth prospects, such policies risk slowing down actual bank restructuring. Indeed, the large gap that has arisen in recent crises between the market and book values of bank equity points to significant recapitalization needs of banks in some countries.

The remainder of the paper is organized as follows. Section II updates the list of banking crises, presenting a complete list of banking crises for the period 1970–2011. Section III presents the updated list of currency and sovereign crises since 1970. Section IV presents the policy responses and outcomes in terms of fiscal costs and real costs during banking crises. Section V concludes.

II. Banking Crises Episodes

A banking crisis is defined as systemic if two conditions are met:

  • 1) Significant signs of financial distress in the banking system (as indicated by significant bank runs, losses in the banking system, and/or bank liquidations)
  • 2) Significant banking policy intervention measures in response to significant losses in the banking system.

We consider the first year that both criteria are met to be the year when the crisis became systemic. We consider policy interventions in the banking sector to be significant if at least three out of the following six measures have been used:2

  • 1) extensive liquidity support (5 percent of deposits and liabilities to nonresidents)
  • 2) bank restructuring gross costs (at least 3 percent of GDP)
  • 3) significant bank nationalizations
  • 4) significant guarantees put in place
  • 5) significant asset purchases (at least 5 percent of GDP)
  • 6) deposit freezes and/or bank holidays.

In implementing this definition of systemic interventions, we consider liquidity support to be extensive when the ratio of central bank claims on the financial sector to deposits and foreign liabilities exceeds 5 percent and more than doubles relative to its pre-crisis level.3 We also include any liquidity support extended directly by the Treasury. This measure of liquidity captures the impact of currency swap lines among central banks, as the amounts swapped and extended to the financial sector will generally be included in central bank claims on the financial sector. However, it does not include liquidity that subsidiaries of a multinational bank receive in a foreign country. For instance, liquidity provided by the Federal Reserve to U.S. subsidiaries of Swiss banks would not be measured as liquidity support in Switzerland, but would be included in U.S. liquidity support. However, this limitation has no impact on the identification of systemic crises in our sample. A broader related aspect is that some crises do not originate domestically but are imported from abroad when foreign subsidiaries of domestic banks get in trouble. One concrete example among recent crisis cases is Austria, where most of the problems originated in Austrian banks’ foreign subsidiaries.

Bank restructuring costs are defined as gross fiscal outlays directed to the restructuring of the financial sector, such as recapitalization costs. We exclude liquidity assistance from the treasury because we include this in our measure of liquidity support. We consider restructuring costs to be significant if they exceed 3 percent of GDP. We focus on gross fiscal costs instead of net because the gross amount reflects the intensity of the intervention.

Asset purchases from financial institutions include those implemented through the treasury or the central bank. We define significant asset purchases as those exceeding 5 percent of GDP.4

A significant guarantee on bank liabilities indicates that either a full protection of liabilities has been issued or that guarantees have been extended to non-deposit liabilities of banks.5 Actions that only raise the level of deposit insurance coverage are not included.

Significant nationalizations are takeovers by the government of systemically important financial institutions and include cases where the government takes a majority stake in the capital of such financial institutions.

In the past, some countries intervened in their financial sectors using a combination of less than three of these measures but on a large scale (for example, by nationalizing all major banks in the country). Therefore, we consider a sufficient condition for a crisis episode to be deemed systemic when either (i) a country’s banking system exhibits significant losses resulting in a share of nonperforming loans above 20 percent or bank closures of at least 20 percent of banking system assets) or (ii) fiscal restructuring costs of the banking sector are sufficiently high exceeding 5 percent of GDP.

A. Ongoing Banking Crises

Table 1 lists recent and ongoing cases that meet our definition of a systemic banking crisis. A number of changes compared to Laeven and Valencia (2010) are noteworthy. First, in the previous release we had classified Spain, Greece, and Kazakhstan as borderline systemic banking crises because they met only two of our significant policy intervention criteria. With fiscal costs in the first two cases now surpassing our threshold and significant nationalizations taken place in the third case, three conditions are met and therefore they are now labeled as systemic banking crises. A second important change is the addition of the banking crisis in Nigeria. In 2009, Nigeria deployed significant liquidity support and guarantees on bank liabilities. In 2010, Nigeria established an asset management company, and in 2011 a significant transfer of nonperforming loans took place, with total fiscal costs associated with bank restructuring by far exceeding our threshold.

Table 1.Systemic Banking Crises, 2007–2011
CountryStart of crisisDate when systemicExtensive liquidity supportSignificant guarantees on liabilitiesSignificant restructuring costsSignificant asset purchasesSignificant nationalizations
Systemic Cases
Austria20082008
Belgium20082008
Denmark20082009
Germany20082009
Greece20082009
Iceland20082008
Ireland20082009
Kazakhstan20082010
Latvia20082008
Luxembourg20082008
Mongolia20082009
Netherlands20082008
Nigeria20092011
Spain20082011
Ukraine20082009
United Kingdom20072008
United States20072008
Borderline Cases
France2008
Hungary2008
Italy2008
Portugal2008
Russia2008
Slovenia2008
Sweden2008
Switzerland2008
source: Authors’ calculations.Notes: Systemic banking crises are defined as cases where at least three of the listed interventions took place, whereas borderline cases are those that almost met our definition of a systemic crisis. Extensive liquidity support is defined as a situation where the amount of central bank claims on the financial sector and liquidity support from the Treasury exceeds 5 percent of deposits and foreign liabilities and is at least twice as large as pre-crisis levels; direct bank restructuring costs are considered significant when they exceed 3 percent of GDP and exclude liquidity and asset purchase outlays; guarantees on liabilities are considered significant when they include actions that guarantee liabilities of financial institutions other than just increasing deposit insurance coverage limits; nationalizations are significant when they affect systemic financial institutions.
source: Authors’ calculations.Notes: Systemic banking crises are defined as cases where at least three of the listed interventions took place, whereas borderline cases are those that almost met our definition of a systemic crisis. Extensive liquidity support is defined as a situation where the amount of central bank claims on the financial sector and liquidity support from the Treasury exceeds 5 percent of deposits and foreign liabilities and is at least twice as large as pre-crisis levels; direct bank restructuring costs are considered significant when they exceed 3 percent of GDP and exclude liquidity and asset purchase outlays; guarantees on liabilities are considered significant when they include actions that guarantee liabilities of financial institutions other than just increasing deposit insurance coverage limits; nationalizations are significant when they affect systemic financial institutions.

We have also added Italy to the list of borderline systemic banking crises because in 2011 liquidity support to the banking system surpassed our threshold. Prior to 2011, Italy had already provided significant guarantees on bank liabilities. Finally, we also update information on asset purchases in Ireland. In Laeven and Valencia (2010), we had not considered asset purchases by Ireland’s National Asset Management Agency (NAMA) because transfers of assets had not started until after December 2009, our previous cutoff. Since then, NAMA has acquired loans with a face value of €74 billion from domestic financial institutions, qualifying as significant asset purchases according to our definition.

In this release, we refine our crisis dating by reporting the date when a crisis started, corresponding to the first signs of significant distress. This year corresponds to the start of the crisis as reported in Laeven and Valencia (2008, 2010). In addition, we report the date when the crisis became systemic, which we define as the date when our definition of a systemic crisis was first met.

The starting dates for the recent crises are as follows: U.S. and U.K. start in 2007, Nigeria in 2009, and all the other cases in 2008. In each of these cases, banking systems showed significant signs of distress followed by government intervention during the starting year of the crisis. However, the crisis reached systemic proportions according to our definition only in 2009 in Denmark, Germany, Greece, Ireland, Mongolia, and Ukraine, in 2010 in Kazakhstan, and in 2011 in Nigeria and Spain.

We also include the corresponding month for the reported dates as well as the month when liquidity support peaked, allowing for an analysis of banking crises at a monthly frequency.6Figure 1 depicts the frequency of banking crises by month of all banking crises since the 1970s. An interesting pattern emerges: banking crises tend to start in the second half of the year, with large September and December effects.

Figure 1.Frequency of Starting Month of Banking Crises

Source: Authors’ calculations.

Banking crises are a worldwide phenomenon. Figure 2 shows the regional distribution of crises, highlighting countries that experienced multiple systemic banking crises during 1970–2011. Many countries experienced more than one crisis over this period, but only two countries, Argentina and the Democratic Republic of Congo, experienced more than two systemic banking crises.

Figure 2.Frequency of Systemic Banking Crises Around the World, 1970 –2011

Source: Authors’ calculations.

In total, we count 147 banking crises since 1970, of which 13 are borderline events, including those reported in Table 1. The complete dataset, together with this paper, is available on the IMF website at http://www.imf.org/external/pubind.htm.

B. Banking Crisis Cycles

Consistent with earlier work (e.g., Reinhart and Rogoff, 2009), we find that crises occur in waves. Figure 3 presents the number of banking crises that start in a given year, showing a marked pick up in crisis activity in the early 1980s. During the 1990s, there were three clusters of crises in the transition economies, in Latin America during the Tequila crisis, and in East Asia during the Asian financial crisis. The early 2000s were a relatively calm period, but ended with the most recent wave, consisting of the largest number of crises since 1970. These crisis cycles frequently coincide with credit cycles. Out of 129 banking crises episodes for which credit data are available, 45 episodes (or about one in three) were preceded by a credit boom.7

Figure 3.Banking Crises Cycles 1/

Source: Authors’ calculations.

1/ Number of systemic banking crises starting in a given year.

III. Currency and Sovereign Debt Crisis

In addition to updating our banking crisis dates and policy responses, we update the list of currency and sovereign debt crisis reported in Laeven and Valencia (2008). As in our earlier work, our definition of a currency crisis builds on Frankel and Rose (1996)’s approach. We define a currency crisis as a nominal depreciation of the currency vis-à-vis the U.S. dollar of at least 30 percent that is also at least 10 percentage points higher than the rate of depreciation in the year before.8 Using this approach, 218 currency crises can be identified during the period 1970-2011, of which 10 episodes occur during 2008–2011.

We date episodes of sovereign debt default and restructuring by relying on information from Beim and Calomiris (2001), World Bank (2002), Sturzenegger and Zettelmeyer (2006), IMF Staff reports, and reports from rating agencies. The information compiled includes the year of sovereign default to private creditors and the year of debt rescheduling. Using this approach, we identify 66 episodes of sovereign debt crisis and debt restructuring during the period 1970–2011, of which 3 episodes during 2008–2011. Greece restructured its public debt in the first half of 2012, which yields one additional sovereign debt crisis case for the year 2012.9

A. Occurrence of Twin and Triplet Crises

Banking crises frequently occur together with currency or sovereign debt crises. Figure 4 reports the frequency with which simultaneous crises occur, including twin crises (the simultaneous occurrence of banking and currency, currency and sovereign debt, or banking and sovereign debt crises) or triplet crises (the simultaneous occurrence of banking, currency, and sovereign debt crises).10 Triplet crises appear to be quite rare (we count only 8 such cases). Among twin crises, those associated with currency crises (either together with banking or sovereign debt crises) are most common, while those involving both banks and sovereign debt are least common.

Figure 4.Simultaneous Crises

Source: Authors’ calculations.

B. Sequencing of Financial Crises

It is also common for banking crises to precede currency and sovereign debt crises (e.g., Kaminsky and Reinhart, 1999; Reinhart and Rogoff, 2011). Figure 5 shows the frequency of currency and sovereign debt crises (relative to the total number of banking crises) that take place in the same country as the banking crisis over the period T-3 to T+3, where T is the starting year of the banking crisis. We find that currency crises and especially sovereign debt crises tend to follow banking crises. While 16% of banking crises are preceded by a currency crisis in the same country within three years prior to the starting year of the banking crisis, 21% of banking crises are followed by a currency crisis within three years following the starting year of the banking crisis. The difference is even starker for sovereign debt crises. Only 1% of banking crises in our sample are preceded by a sovereign debt crisis within three years prior to the start of the banking crisis, whereas 5% of banking crises are followed by a sovereign debt crisis within three years of the onset of the banking crisis.

Figure 5.Timing of Currency and Sovereign Debt Crises Relative to Banking Crises

(In percent of the number of banking crises)

Source: Authors’ calculations.

Note: T denotes the starting year of the banking crisis.

IV. Policy Responses and Outcomes in Banking Crises

We update the policy responses during the crises, including monetary expansion and liquidity support, with information up to end-2011. This update is particularly relevant for recent crisis cases which had just started or were still unfolding at the time of writing our earlier data release in Laeven and Valencia (2010). In addition, we also update our estimates of the outcomes of banking crises, which include output losses, fiscal costs, increases in public debt, and peak nonperforming loans (NPLs).11

A. Policy Response

The differences in policy mix between advanced economies and emerging economies is summarized in Figure 6. The figure shows the fraction of episodes in which the corresponding policy was used, differentiating countries by income level.

Figure 6.Differences in the Mix of Crisis Policies

Source: Authors’ calculations.

Deposit freezes, while rare, are most frequently used by emerging economies, whereas guarantees on bank liabilities are more common among advanced economies. Guarantees are more common among advanced economies, perhaps because of generally better institutions and access to international capital markets, rendering the announcement of guarantees more credible. However, as noted in Claessens et al. (2011), guarantees in recent crises were on average less comprehensive (more targeted) than in past crises, when they generally covered a broad set of liabilities and were mostly announced in the form of blanket guarantees.

We collect data on whether deposit insurance was in place at the start of the crisis for about half the crises episodes. In 70 percent of episodes for which we collected data, a deposit insurance scheme was already in place when the crisis erupted. Moreover, the data show that emerging economies are more likely to adopt deposit insurance around the time of a crisis. Only in 40 percent of cases, losses are imposed on bank creditors, suggesting that implicit guarantees are important. Recapitalization packages and extensive liquidity support are also more common in advanced countries, albeit only marginally, whereas nationalizations of financial institutions are equally common in advanced and other economies.

To gain insights into the relative use of fiscal and monetary policy, we construct measures of expansionary fiscal and monetary policies (reported in our dataset as monetary and fiscal policy indices) that take a value of one if the policies are expansionary, and zero otherwise. We first construct a variable equal to the difference between the increase in public debt (reported in Table 2) and the fiscal cost of bank intervention policies. The median for this variable is close to 7 percent. This means public debt, after subtracting increases in public debt resulting from fiscal outlays associated with financial intervention packages, increases by about 7 percent for the median country. We use this difference as a proxy for the magnitude of discretionary fiscal policies as well as automatic stabilizers. It is admittedly a crude measure, but it should provide a broad indication of the intensity of factors other than bank recapitalization that affected the fiscal position of a country, including discretionary fiscal policy.

Table 2.Banking Crises Outcomes, 1970–2011
CountryOutput

loss
Increase

in debt
Monetary

expansion
Fiscal

costs
Fiscal

costs
DurationPeak

liquidity
Liquidity

support
Peak

NPLs
Medians
In percent of GDPIn percent

of financial

system

assets
In yearsIn percent of

deposits and

foreign liabilities
In percent

of total

loans
All23.012.11.76.812.72.020.19.625.0
Advanced32.921.48.33.82.13.011.55.74.0
Emerging26.09.11.310.021.42.022.311.130.0
Developing1.610.91.210.018.31.022.612.337.5
Source: Authors’ calculations.
Source: Authors’ calculations.

For the purpose of the chart, we consider fiscal policy to be expansionary when this variable takes on a value that exceeds its mean by half a standard deviation. Similarly, we define expansionary monetary policy as instances when the increase in reserve money is half a standard deviation above its mean. Figure 6 shows that both expansionary monetary and fiscal policies were more commonly used in advanced economies. The difference, however, is much more pronounced in the case of fiscal policy. Because advanced economies have better access to financing large fiscal deficits, they are in a better position than other economies to allow for fiscal automatic stabilizers to operate during banking crises or even to enact countercyclical discretionary fiscal packages.

B. Outcomes

We measure outcomes of the crises with four main variables: the fiscal costs of a crisis (computed as the direct fiscal outlays due to financial sector rescue packages), the output losses (computed as the cumulative loss in income relative to a pre-crisis trend), the increase in public debt, and the peak in NPL’s. Direct fiscal costs include fiscal outlays committed to the financial sector from the start of the crisis up to end-2011.12 Output losses are computed as deviations of actual GDP from its trend. The increase in public debt is measured as the change in the public debt-to-GDP ratio over the four-year period beginning with the crisis year.13 Specifically, we compute the increase in public debt measured in percent of GDP over [T-1, T+3], where T is the starting year of the crisis.14

Figure 7.Output Losses for Selected Crises Episodes 1/

Sources: World Economic Outlook and authors’ calculations.

1/Year T equals 2007 for USA, 2008 for Ireland and Germany, 1994 for Mexico, 1997 for Thailand and Japan. GDP in T-4 is set equal to 100.

Table 2 shows the median values for the outcome variables across all episodes reported in our database, over 1970–2011. Table A1 shows individual country level data. The episodes are classified according to income level at the time of the crisis. In addition to the outcome variables listed above, Table 2 also reports quantitative measures on policy intervention, which complements the frequency of tools used described in the previous section. We report peak liquidity support provided by central banks measured as the highest level of central bank claims against financial institutions,15 normalized by financial institutions’ deposits and foreign liabilities. The difference between this peak and the pre-crisis level of central bank claims is reported as liquidity support provided during the crisis. We also report the duration of the crisis, computing as the difference between the end and start years of the crisis, measured in years. Finally, we report data on the monetary expansion computed as the change in the monetary base between its peak during the crisis and its level one year prior to the crisis, expressed in percentage points of GDP.16

As in Laeven and Valencia (2010), we report end dates for each crisis, except for recent crises where our condition for determining the end of a crisis is not (yet) met.17 We also report the peak level of nonperforming loans, over the period [T, T+5], where T is the starting year of the crisis. For the recent episodes, where a 5-year window may not be available yet, the peak is computed over the period [T, latest data available]. These outcome variables are constructed for illustrative purposes to gauge the consequences of banking crises. It is important to note that they reflect the total impact of the crisis, including any feedback effects and other factors contemporaneous to the banking crisis. Therefore, when we report output losses or increases in debt, they should not be attributed to the banking crisis alone.

The data show that output losses and increases in public debt tend to be larger in advanced economies. Output losses in advanced economies are larger in part because with deeper financial systems, a banking crisis is more disruptive. Moreover, for the crises that started in 2007 onwards, the median output loss reaches 25 percent, whereas the non-crisis countries exhibit a median output loss of 0 percent. Clearly, countries that experienced a banking crisis suffered more than those which did not. In contrast, fiscal costs are larger in developing and emerging economies. This is the case irrespective of whether we measure fiscal costs in percent of GDP or in percent of financial system assets, to account for differences in the relative size of financial systems. In fact, the gap in fiscal costs between advanced and other economies widens substantially once we account for the size of financial systems.18 Moreover, while increases in public debt during banking crises in emerging and developing economies are mostly due to fiscal outlays associated with financial sector intervention policies, in advanced economies such fiscal outlays constitute only a fraction of the overall increase in public debt, with discretionary fiscal policy and automatic stabilizers playing a much more important role.

We noted in the previous section a marked difference among advanced and other economies in the use of macroeconomic policies. Similarly, increases in public debt and monetary expansion tend to be larger in advanced economies than in emerging and developing economies. Note that the difference in monetary expansion between advanced economies versus emerging and developing countries is now significant, consistent with what one would expect, unlike our earlier results based on a binary measure of monetary expansion. Emerging and developing countries face capital outflows and large currency depreciations upon which they respond by tightening monetary policy.

The greater reliance on macroeconomic tools may also explain why crises tend to last longer in advanced economies. If macroeconomic policies are used to avoid a sharp contraction in economic activity, this may discourage more active bank restructuring that would allow banks to recover more quickly and renew lending to the real economy, with the risk of prolonging the crisis and depressing growth for a prolonged period of time (see also Claessens et al., 2011).

The costs of banking crises vary markedly. Figure 8 reports the ten costliest crises in terms of fiscal costs, increases in public debt, and output losses. Along all three dimensions, recent and ongoing crises feature among the ten costliest crises since the 1970s. In terms of fiscal costs, the still ongoing banking crises in Iceland and Ireland already rank among the ten costliest crises. Fiscal costs have reached very high levels in Iceland and Ireland in part because of the relatively large size of the financial systems in these economies, amounting to multiples of GDP.

Figure 8.Costliest Banking Crises Since 1970

Source: Authors’ calculations.

Iceland and Ireland also feature among the ten costliest banking crises in terms of overall increase in public debt, with public debt in both cases increasing by more than 70 percent of GDP within four years. In terms of output losses, the ongoing crises in Ireland and Latvia are among the ten costliest banking crises since the 1970s, with output losses exceeding 100 percent in both cases. Ireland holds the undesirable position of being the only country currently undergoing a banking crisis that features among the top-ten of costliest banking crises along all three dimensions, making it the costliest banking crisis in advanced economies since at least the Great Depression. And the crisis in Ireland is still ongoing.

The size of the financial sector is an important driver of fiscal costs. Figure 9 shows a comparison between the median fiscal costs in emerging markets and advanced economies in our data, with fiscal costs expressed either in percent of GDP or in percent of financial system assets. For brevity, we only show the median value for emerging economies. For the median emerging market economy, fiscal costs double in magnitude when they are expressed in terms of financial system assets, highlighting the relatively low level of financial development in these economies. For advanced economies, Iceland, Ireland, and Israel stand out when fiscal costs are expressed relative to GDP, with Iceland being the costliest crisis in terms of fiscal costs to GDP at 44.2 percent of GDP. However, given the relatively large banking systems in Iceland and Ireland, fiscal costs are significantly lower in these countries when expressed relative to financial system assets. When normalized by financial system assets, the highest fiscal outlays took place during Israel’s banking crisis of 1977.

Figure 9.Fiscal Costs Relative to GDP and Financial System Assets

Source: Authors’ calculations.

Fiscal costs consist primarily of bank recapitalizations and asset purchases. Table A2 shows the breakdown of fiscal costs for the recent crises episodes, as well as detailed information on asset guarantees. The median fiscal cost for the recent episodes, excluding borderline cases, is 4.7 percent of GDP (2.8 percent with borderline episodes). Since most countries suffering a banking crises since 2007 are advanced economies, the median fiscal cost is similar to that for past crises in advanced economies. This number, however, is less than half of that for crises in emerging and developing countries. One explanation is that this time not all costs are born in the conventional way, that is, through a comprehensive restructuring of the banking system. Reliance on loose monetary policy can be seen as an alternative recapitalization of highly leveraged sectors, including financial institutions, albeit at a slower pace than through direct equity injections into financial institutions. Indeed, as shown in Table 3, the market valuation of financial institutions (as of end-2010) indicated in many cases still a sizable gap between the market and book value of banks. While overshooting in stock prices may be partly driving these gaps, they can also be interpreted as suggesting that some banks may have sizeable capital shortfalls. At the country level, the median gap between market and book values for banks with market-to-book values below one is about 3.3 percent of GDP.

Table 3.Comparison of Market and Accounting Values of Bank Equity, end-2010
Difference between market and book value of distressed banks 1/
CountryIn percent of GDPIn percent of total banking assets
Austria4.72.9
Belgium 2/6.72.4
Denmark0.80.4
France5.92.0
Germany1.61.2
Greece7.73.2
Ireland 2/6.13.0
Italy7.84.7
Kazakhstan 2/0.40.8
Netherlands4.61.8
Portugal 2/3.32.3
Slovenia 2/0.82.4
Spain3.01.1
Sweden 2/0.20.1
Switzerland2.90.5
Ukraine 2/0.00.1
United Kingdom6.11.5
United States1.51.1
Sources: Bankscope, Datastream, and authors’ calculations.

Country aggregate of the dollar value difference between the market and book values of bank equity for banks with a market-to-book value less than one. These gaps between market and book values of equity are expressed either relative to country GDP or total banking assets, where banking assets are computed by aggregating the consolidated balance sheets of individual banks in the sample at the country level.

Country aggregate based on less than 5 banks.

Sources: Bankscope, Datastream, and authors’ calculations.

Country aggregate of the dollar value difference between the market and book values of bank equity for banks with a market-to-book value less than one. These gaps between market and book values of equity are expressed either relative to country GDP or total banking assets, where banking assets are computed by aggregating the consolidated balance sheets of individual banks in the sample at the country level.

Country aggregate based on less than 5 banks.

Net fiscal costs, after asset recoveries, are significantly lower than gross outlays in some cases. For example, the Swiss authorities more than fully recovered the fiscal outlays associated with the convertible notes program offered in support of UBS. However, net fiscal outlays are not necessarily the right metric for assessing the success of a government program because taxpayer money was put at great risk in the process and because government interventions associated with market failures can be welfare enhancing even when outlays are positive.

The recent wave of crises includes a significant number of countries in the euro area. Given that monetary policy is decided at the euro area level (plus financial institutions established in the euro area can freely provide their services throughout the euro area under EU “single passport” rules), it is interesting to compare crisis resolution policies and outcomes in the euro area with those in the United States when treating the euro area as a single economy.19 The comparison is for illustrative purposes only because circumstances vary widely across countries within the euro area, but it serves the purpose of illustrating that the severity of crisis in the euro area, despite being unevenly spread among euro area countries, is comparable to that of the U.S. if the euro area could be seen as a single economy, enjoying not only a monetary union but also a common financial safety net, backed by some form of fiscal federalism. Table 4 shows the comparison when we aggregate resolution policies and outcomes across the euro area.

Table 4.Crises Outcomes and Resolution in the Euro Area and the United States
CountryOutput

loss
Increase

in debt
Monetary

expansion
Fiscal

costs
Fiscal costsPeak

liquidity
Liquidity

support
Peak

NPLs
In percent of GDPIn percent of

financial system

assets
In percent of

deposits and

foreign liabilities
In percent

of total

loans
Euro area23.019.98.33.91.719.313.33.8
United States31.023.67.94.52.14.74.73.9
Source: Authors’ calculations.
Source: Authors’ calculations.

The table shows that according to our three metrics of crisis outcomes and costs (fiscal costs, output losses, and increases in public debt), the crisis in the euro area as a whole has thus far been comparable in magnitude to that in the United States. However, liquidity support has been much larger in the euro area, indicating the significant role played by the Eurosystem (including the ECB) in meeting liquidity needs of banks, including through Emergency Liquidity Assistance (ELA) and Long-Term Refinancing Operations (LTRO) operations. Nevertheless, monetary expansion has been similar thus far. Of course, with sovereign debt and banking sector problems continuing to put pressure on a number of euro area countries, and the increasing interlinkages between sovereign and banking sector risks, the final tally could be very different.

V. Conclusions

This paper provides an update of the widely used IMF database on systemic banking crises by Laeven and Valencia (2008). Compared to our earlier version of the database, we add several recent crises, update information on output losses and fiscal costs for crises that are ongoing, and date banking crises not only at an annual frequency but also at a monthly frequency. These updates are particularly significant in the case of euro area economies that are currently experiencing banking crises.

The data point to several interesting issues that require further research. First, while traditionally costly banking crises were associated with emerging economies, more recent cases also involve advanced economies. This raises questions about whether there has been any systematic change that has led to increased fragility of banking systems in advanced economies that are otherwise generally perceived to enjoy deeper financial markets and higher quality institutions. Second, while macroeconomic policies have been used aggressively in recent advanced economy crises, actual bank restructuring has been relatively slow. This raises questions about the pace of recovery and the optimal policy mix in resolving financial crises in advanced economies.

Table A1.Banking Crises Dates and Costs, 1970–2011
CountryStartEndOutput

loss

1/
Fiscal

Costs

2/
Peak

liquidity

3/
Liquidity

support

3/
Peak

NPLs

4/
Increase in

public debt

5/
Monetary expansion 6/Credit

boom

7/
Albania 11/199419947.626.8
Algeria19901994 9/41.437.629.930.019.1-4.70
Argentina19801982 8/58.255.164.662.29.033.110.61
Argentina1989199112.66.0151.6135.727.0-21.310.00
Argentina 10/199519950.02.071.463.017.08.7-0.81
Argentina2001200371.09.622.922.620.181.98.20
Armenia 4/19941994 8/41.423.00
Austria200814.04.911.77.72.814.88.30
Azerbaijan 11/19951995 8/127.684.50.9
Bangladesh198719870.026.02.820.03.51.40
Belarus 11/1995199535.8-16.50
Belgium200819.06.019.714.13.118.78.31
Benin19881992 9/14.917.099.648.680.05.713.01
Bolivia1986198649.257.525.930.0-107.31.70
Bolivia199419940.06.031.912.96.2-19.21.61
Bosnia and Herzegovina 11/19921996 9/0
Brazil 10/19901994 9/62.30.011.310.7-22.67.71
Brazil199419980.013.220.117.616.0-33.8-4.31
Bulgaria1996199759.514.017.39.975.0-30.1-2.20
Burkina Faso199019949.44.516.08.92.80
Burundi19941998 9/121.223.418.325.010.92.60
Cameroon19871991 9/105.559.140.965.018.01.00
Cameroon199519978.112.36.230.0-1.10.40
Cape Verde199319930.04.030.018.2-40.60
Central African Rep197619760.090.810.5-4.82.51
Central African Rep199519969.024.820.940.0-16.30.7
Chad198319830.0199.341.3-7.2-0.30
Chad19921996 9/0.0120.941.435.027.1-0.8
Chile1976197619.932.223.6-69.51.60
Chile19811985 9/8.642.961.252.735.687.90.51
China, Mainland1998199819.418.062.07.220.011.20.00
Colombia1982198247.05.021.17.74.116.6-0.81
Colombia1998200043.46.35.14.314.015.40.50
Congo, Dem Rep198319831.420.018.939.50
Congo, Dem Rep19911994 9/129.544.730.242.20
Congo, Dem Rep19941998 9/79.077.377.175.039.30
Congo, Rep1992199447.430.716.6103.51.40
Costa Rica198719910.020.26.1-27.52.90
Costa Rica199419950.015.26.332.04.81.11
Cote d’Ivoire19881992 9/45.025.076.922.550.013.6-3.30
Croatia 11/199819996.93.23.110.514.15.20
Czech Republic 10/11/19962000 9/6.812.74.218.01.8-1.30
Denmark200836.03.120.111.44.524.91.20
Djibouti19911995 9/42.65.23.2
Dominican Rep2003200422.043.438.19.016.56.71
Ecuador19821986 9/98.2146.7100.024.4-1.70
Ecuador1998200225.421.726.022.540.09.1-0.51
Egypt198019800.966.722.7-4.2-2.31
El Salvador198919900.051.611.537.0-29.61
Equatorial Guinea19831983 8/0.075.80
Eritrea19931993 8/0
Estonia 11/199219941.930.97.00
Finland1991199569.612.812.05.513.043.61
France 10/200823.01.08.97.44.017.38.30
Georgia 11/19911995 9/33.00
Germany200811.01.811.53.63.717.88.30
Ghana1982198345.36.00.20.135.015.5-0.5
Greece200843.027.344.342.314.744.58.31
Guinea19851985 8/0.03.00
Guinea199319930.014.63.945.06.7
Guinea-Bissau1995199829.6137.339.245.0108.111.4
Guyana199319930.01.81.7-241.0-10.50
Haiti1994199837.54.8-119.4-5.80
Hungary 11/19911995 9/0.010.047.04.623.019.64.50
Hungary 10/200840.02.71.41.313.3-0.3-0.81
Iceland200843.044.221.216.861.272.2-2.31
India199319930.04.33.620.0-7.71.30
Indonesia19972001 9/69.056.823.117.232.567.64.50
Ireland2008106.040.720.016.312.972.88.31
Israel1977197776.030.043.216.528.41
Italy200832.00.37.75.711.08.68.30
Jamaica1996199837.843.90.40.328.92.97.60
Japan19972001 9/45.014.02.41.635.041.77.20
Jordan19891991106.410.020.716.1-61.015.50
Kazakhstan 10/20080.03.75.55.031.99.13.30
Kenya1985198523.72.01.911.00.50
Kenya1992199450.325.224.312.17.40
Korea1997199857.631.227.411.935.09.9-0.41
Kuwait19821985143.49.62.940.016.22.50
Kyrgyz Rep 11/19951999 9/286.151.885.042.90
Latvia 11/199519963.09.25.520.00.4
Latvia2008106.05.63.63.415.928.1-2.71
Lebanon19901993102.24.42.8
Liberia19911995 9/85.284.2
Lithuania 11/199519963.127.518.932.210.80
Luxembourg200836.07.714.74.11.314.68.3
Macedonia, FYR 11/199319950.032.022.370.00
Madagascar198819880.020.219.425.0-25.81.00
Malaysia1997199931.416.49.78.830.00.24.01
Mali19871991 9/0.050.514.875.0-11.31.70
Mauritania198419847.515.048.427.770.01.20
Mexico19811985 9/26.65.32.622.65.00
Mexico1994199613.719.316.815.818.916.40.41
Mongolia20080.04.210.59.4-5.03.00
Morocco19801984 9/21.922.18.635.6-1.00
Mozambique19871991 9/0.04.24.260.9-36.60
Nepal198819880.014.63.829.011.72.10
Netherlands200823.012.75.93.73.226.88.30
Nicaragua1990199311.4195.1156.550.0-31.0
Nicaragua200020010.013.621.820.912.714.93.31
Niger1983198597.245.614.150.025.93.51
Nigeria19911995 9/0.06.65.477.063.37.2
Nigeria200914.011.825.311.730.17.7-0.50
Norway199119935.12.716.94.216.419.20.50
Panama1988198985.012.93.63.2-2.60.10
Paraguay1995199515.312.927.323.88.1-1.23.21
Peru19831983 8/55.216.89.714.35.20
Philippines1983198691.73.019.41.519.044.88.41
Philippines 10/19972001 9/0.013.21.40.720.010.40.81
Poland 11/199219940.03.545.98.724.0-21.6-0.70
Portugal 10/200837.00.018.016.77.333.68.30
Romania 11/19901992 8/0.00.6129.130.06.30
Russia 11/19981998 8/0.123.721.140.0-7.10
Russia 10/20080.02.324.823.99.66.41.01
São Tomé & Príncipe19921992 8/1.990.0-706.30
Senegal198819915.617.074.76.650.0-14.22.00
Sierra Leone19901994 9/34.50.00.045.062.9-0.8
Slovak Rep1998 11/2002 9/0.013.04.835.015.4-1.01
Slovenia 11/1992199214.610.03.60
Slovenia 10/200838.03.610.29.612.118.08.31
Spain19771981 9/58.55.67.63.55.83.80
Spain200839.03.88.36.45.830.78.31
Sri Lanka1989199119.65.08.02.035.0-5.5-1.00
Swaziland19951999 9/45.73.63.22.5-1.00
Sweden1991199532.93.63.10.213.036.25.11
Sweden 10/200825.00.713.213.02.011.16.30
Switzerland 10/20080.01.14.63.00.5-0.27.60
Tanzania198719880.010.0100.997.670.064.60
Thailand1983198324.80.78.52.015.70.30
Thailand19972000109.343.85.14.433.042.13.91
Togo1993199438.86.21.723.8-3.00
Tunisia199119911.33.031.515.14.20.11
Turkey1982198435.02.571.729.312.32.41
Turkey2000200137.032.020.515.227.615.31
Uganda199419940.07.63.9-26.90.6
Ukraine 11/199819990.00.019.13.362.46.03.4
Ukraine20082.04.530.19.215.528.91.71
United Kingdom200725.08.89.05.64.024.49.41
United States 10/198819880.03.70.10.14.110.5-0.10
United States200731.04.54.74.75.023.67.90
Uruguay19811985 9/38.131.224.618.583.33.21
Uruguay2002200527.420.012.87.936.337.02.01
Venezuela19941998 9/1.215.02.91.624.0-23.01.30
Vietnam199719970.010.064.924.835.0-52.74.90
Yemen1996199616.40.80.7-56.7-12.40
Zambia1995199831.11.427.924.936.2-1.7
Zimbabwe19951999 9/10.48.65.020.91.91
Sources: WEO, IFS, IMF Staff reports, Laeven and Valencia (2008), and authors’ calculations.

In percent of GDP. Output losses are computed as the cumulative sum of the differences between actual and trend real GDP over the period [T, T+3], expressed as a percentage of trend real GDP, with T the starting year of the crisis.

In percent of GDP. Fiscal costs are defined as the component of gross fiscal outlays related to the restructuring of the financial sector. They include fiscal costs associated with bank recapitalizations but exclude asset purchases and direct liquidity assistance from the treasury.

Liquidity is measured as the ratio of central bank claims on deposit money banks (line 12 in IFS) and liquidity support from the Treasury to total deposits and liabilities to non-residents. Total deposits are computed as the sum of demand deposits (line 24), other deposits (line 25), and liabilities to non-residents (line 26).

In percent of total loans. NPLs data come from IMF Staff reports and Financial Soundness Indicators.

In percent of GDP. The increase in public debt is measured over [T-1, T+3], where T is the starting year of the crisis. For the 2007–2009 crises, it is computed as the difference between pre- and post-crisis debt projections.

In percent of GDP. Monetary expansion is computed as the change in the monetary base between its peak during the crisis and its level one year prior to the crisis. Monetary expansion is the same for all euro area countries, measured at the euro area level to reflect the common monetary policy.

Credit data missing. For these countries, end dates are based on GDP growth only.

We truncate the duration of crises at 5 years, starting with the first crisis year.

Borderline cases.

No output losses are reported for crises in transition economies that took place during the period of transition to market economies. Output losses are computed as the cumulative difference between actual and trend real GDP, expressed as a percentage of trend real GDP for the period [T, T+3] where T is the starting year of the crisis. Trend real GDP is computed by applying an HP filter (λ=100) to the GDP series over [T-20, T-1].

Sources: WEO, IFS, IMF Staff reports, Laeven and Valencia (2008), and authors’ calculations.

In percent of GDP. Output losses are computed as the cumulative sum of the differences between actual and trend real GDP over the period [T, T+3], expressed as a percentage of trend real GDP, with T the starting year of the crisis.

In percent of GDP. Fiscal costs are defined as the component of gross fiscal outlays related to the restructuring of the financial sector. They include fiscal costs associated with bank recapitalizations but exclude asset purchases and direct liquidity assistance from the treasury.

Liquidity is measured as the ratio of central bank claims on deposit money banks (line 12 in IFS) and liquidity support from the Treasury to total deposits and liabilities to non-residents. Total deposits are computed as the sum of demand deposits (line 24), other deposits (line 25), and liabilities to non-residents (line 26).

In percent of total loans. NPLs data come from IMF Staff reports and Financial Soundness Indicators.

In percent of GDP. The increase in public debt is measured over [T-1, T+3], where T is the starting year of the crisis. For the 2007–2009 crises, it is computed as the difference between pre- and post-crisis debt projections.

In percent of GDP. Monetary expansion is computed as the change in the monetary base between its peak during the crisis and its level one year prior to the crisis. Monetary expansion is the same for all euro area countries, measured at the euro area level to reflect the common monetary policy.

Credit data missing. For these countries, end dates are based on GDP growth only.

We truncate the duration of crises at 5 years, starting with the first crisis year.

Borderline cases.

No output losses are reported for crises in transition economies that took place during the period of transition to market economies. Output losses are computed as the cumulative difference between actual and trend real GDP, expressed as a percentage of trend real GDP for the period [T, T+3] where T is the starting year of the crisis. Trend real GDP is computed by applying an HP filter (λ=100) to the GDP series over [T-20, T-1].

Table A2.Direct Fiscal Outlays, Recoveries to Date, and Asset Guarantees, 2007–2011(In percent of GDP)
CountryType of outlaySpecific fiscal outlayGross outlays 1/Recoveries 2/Net outlays
AustriaRecapitalizationCapital Injection Program2.9
Asset purchaseImpaired assets and liquidity2.0
Total fiscal outlays4.9
Asset guaranteeAsset guarantee program0.6
BelgiumRecapitalizationEthias, Fortis, KBC, and Dexia5.8
OtherCapital for Fortis SPV0.2
Total fiscal outlays6.0
Asset guaranteeAsset relief facility6.0
Fortis SPV1.3
Fortis portfolio0.4
Total asset guarantees7.7
DenmarkRecapitalizationCapital Assistance Program2.7
Capital injection in Fionia Bank0.1
OtherLoan to Fionia Bank0.3
Total fiscal outlays3.1
FranceRecapitalizationSPPE acquisition of subordinated bonds0.5
Second stage recapitalization (BNP, SG, Dexia)0.5
Total fiscal outlays1.0
Asset guaranteeFinancial Security Assurance Inc.0.3
GermanyRecapitalizationFederal and state recapitalizations and guarantees for1.7
capital support
Norddeutsche Landesbank Girozentrale0.1
Total fiscal outlays1.8
Asset purchaseAsset purchase program11.1
Asset guaranteeBad Bank Act 3/6.1
GreeceRecapitalizationCapital injection package I1.7
Agricultural Bank of Greece0.2
Capital Injection package II0.5
2012 Capital Injection package III (IMF estimate)23.0
OtherLiquidity1.9
Total fiscal outlays27.3
HungaryRecapitalizationCapital injection in FHB (mortgage lender)0.1
OtherFX loans to large banks2.6
Total fiscal outlays2.71.61.1
IcelandRecapitalizationSecurities lending6.2
Commercial banks recapitalizations14.7
Recapitalization of the House Financing Fund2.1
“Savings banks”1.3
OtherCentral bank recapitalization18.1
Called guarantees of the State Guarantee Fund1.8
Total fiscal outlays44.223.720.5
IrelandRecapitalizationBoI, AIB, Anglo Irish, EBS, INBS29.5
Capital injections to meet PCAR stress test results11.2
Total fiscal outlays40.7
Asset purchaseAssets purchased by NAMA20.3
Asset guaranteeNAMA19.1
ItalyRecapitalizationRecapitalization scheme0.3
KazakhstanRecapitalizationBTA, Halyk, Alliance, and KKB2.4
OtherLiquidity through deposits of the development agency1.3
Total fiscal outlays3.7
LatviaRecapitalizationParex and MLBN3.10.82.3
OtherLiquidity2.5
Total fiscal outlays5.60.84.8
LuxembourgRecapitalizationFortis and Dexia7.7
MongoliaRecapitalizationRecapitalization and restructuring costs4.2
NetherlandsRecapitalizationFortis, ING, SNS, and AEGON6.6
OtherLoans to Icesave and Icelandic deposit Insurance0.2
Loan to Fortis5.9
Total fiscal outlays12.77.15.6
Asset guaranteeABN AMRO/Fortis Mortgage portfolio6.0
ING Alt-A RMBS portfolio4.8
Total asset guarantees10.8
NigeriaRecapitalizationRecapitalizations and purchase of bad assets11.8
RussiaRecapitalizationState Mortgage Agency, VTB, Rosselhozbank, Rosagroleasing, VEB1.0
Subordinated loans from VEB0.9
Liquidity through government deposits in commercial banks0.4
Total fiscal outlays2.3
SloveniaRecapitalizationNLB and NKBM0.8
LiquidityPublic sector deposits in banks (proceed from bond issue)2.8
Total fiscal outlays3.6
SpainRecapitalizationRecapitalization of cajas and other banks 4/2.0
Asset purchasePurchase of high-quality securities from credit institutions1.8
Total fiscal outlays3.8
Asset guaranteeAsset protection scheme for BBK (takeover of Cajasol)0.0
SwedenRecapitalizationRecapitalization package0.2
OtherInitial contribution to stabilization fund0.5
Total fiscal outlays0.7
SwitzerlandRecapitalizationMandatory convertible notes UBS1.11.5-0.4
UkraineRecapitalizationPublic recapitalization program4.5
United KingdomRecapitalizationRBS, Lloyds, LBG, and Northern Rock5.0
OtherDunfermline Building Society takeover0.1
Deposit compensation1.8
Loans to Northern Rock and Bradford & Bingley1.9
Total fiscal outlays8.82.26.6
Asset guaranteePool of RBS assets and CoCos14.5
United StatesRecapitalizationCapital Purchase Program (CPP)1.51.50
AIG0.50.10.4
Targeted Investment Program0.30.30
Support to GMAC0.100.1
Support to Fannie Mae and Freddie Mac1.20.21.0
OtherAutomotive Industry Financial program0.50.30.2
Asset purchaseMBS purchase0.300.3
Public-Private Investment Program0.100.1
Total fiscal outlays4.52.42.1
Asset guaranteeCitigroup asset guaranteesmall
Sources: IMF staff reports and official websites.

Gross fiscal costs and recoveries differ somewhat from those in the IMF’s Fiscal Monitor (February 2012, Table 7, p.23), partly reflecting the different time periods used. For Germany, the Fiscal Monitor figures include financial sector support measures taken by subnational governments. And for Greece, the Fiscal Monitor figures do not include the Spring 2012 capital injection package.

Includes repayments up to end-2011 of capital support as well as interest and fees generated from loans and guarantee programs for the cases where the data was available.

Includes guarantees issued by the Stabilization Fund (items related to the Bad Bank Act and debt issued by financial institutions).

Recapitalized banks include Catalunya Caixa, Unnim, Espana-Duero, Nova Caixa Galicia, Banco Financiero y de Ahorros, Banco Mare Nostrum, Banca Civica, Caja del Mediterraneo, and Banco de Valencia.

Sources: IMF staff reports and official websites.

Gross fiscal costs and recoveries differ somewhat from those in the IMF’s Fiscal Monitor (February 2012, Table 7, p.23), partly reflecting the different time periods used. For Germany, the Fiscal Monitor figures include financial sector support measures taken by subnational governments. And for Greece, the Fiscal Monitor figures do not include the Spring 2012 capital injection package.

Includes repayments up to end-2011 of capital support as well as interest and fees generated from loans and guarantee programs for the cases where the data was available.

Includes guarantees issued by the Stabilization Fund (items related to the Bad Bank Act and debt issued by financial institutions).

Recapitalized banks include Catalunya Caixa, Unnim, Espana-Duero, Nova Caixa Galicia, Banco Financiero y de Ahorros, Banco Mare Nostrum, Banca Civica, Caja del Mediterraneo, and Banco de Valencia.

Table A3.Systemic Banking Crises Policy Responses, 2007–2011
CountryLiquidity

Support
Gross

Restructuring

Costs
Asset Purchases

and Guarantees
Guarantees on Bank LiabilitiesSignificant nationalizations
(percentage

points increase in

central bank

claims on financial

institutions over

deposits and

foreign liabilities) 3/
(recapitalization

and other

restructuring costs,

excluding liquidity

support, in percent

of GDP)
(funded by

treasury and

central bank, in

percent of GDP)
(significant guarantees on bank liabilities in addition

to increasing deposit insurance ceilings)
(state takes control over institutions;

year of nationalization between

brackets)
Austria84.9Guarantees: 0.6Unlimited coverage to depositors Bank and non-bank bond issuesHypo Group Alpe Adria, Kommunalkredit (2009)
Belgium14.16.0Guarantees: 7.7DI raised from €20,000 to €100,000 Deposit-like insurance instruments Interbank loans and short-term debt Specific guarantees on DexiaFortis (2008), Dexia Bank Belgium (2011)
Denmark11.42.8Deposits and unsecured claims of PCA banksFionia Bank (2009)
France7.41.0Guarantees: 0.3DI already higher than EU new limit €360 billion in guarantees for refinancing credit institutions Guarantee on €55 billion of Dexia’s debt
Germany3.51.8Guarantees: 6.1 Purchases: 11.1Unlimited coverage of household deposits Interbank loans and bank debt (capped at €400 bn)Hypo Real Estate (2009)
Greece 1/42.325.4DI raised from €20,000 to €100,000Funding guarantees up to €15 billion, expanded to €15 billion in 2011
Hungary1.30.1Unlimited protection to depositors of small banks
Iceland16.844.2Unlimited coverage to domestic depositsKaupthing, Landsbanki, Glitnir, Straumur-Burdaras, SPRON and Sparisjódabankinn (all 2008)
Ireland16.340.7Guarantees: 19.1 Purchases: 20.3Unlimited coverage to most liabilities of 10 banksAnglo Irish Bank (2009), EBS limited and Irish Nationwide Building Society (2010), Irish Life and Permanent (2011)
Italy5.70.3DI already higher than the EU limit State guarantee for new bank liabilities
Kazakhstan52.4DI raised from T0.7 million to T5 millionBank Turan Alem, Alliance Bank (2009)
Latvia3.43.1DI raised to €50,000 Guarantee on Parex syndicated loansParex Bank (2008)
Luxembourg4.17.7DI raised from €20,000 to €100,000 €4.5 billion guarantee on Dexia’s debtFortis and Dexia’s subsidiaries (2008)
Mongolia9.44.2Unlimited coverage to all depositsZoos Bank (2009)
Netherlands3.76.6Guarantees: 3.3DI raised to €100,000 Interbank loans of solvent banks Fortis bonds (€5 bn) and ING bonds (€10 bn)ABN-AMRO/Fortis (2008)
Nigeria11.711.8Purchases: 9.3Guaranteed on all interbank transactions, foreign credit lines, and pension depositsAfribank Plc, Bank PHB Plc, Spring Bank Plc (2011)
Portugal 2/16.70DI raised from €25,000 to €100,000 Debt securities issued by credit institutions (20% of GDP)
Russia23.91.9DI raised from R400,000 to R700,000 Interbank lending for qualifying banks
Slovenia9.60.8Unlimited protection for all deposits by individuals and small enterprises until end-2010, and capped at €100,000 thereafter New debt issued by financial institutions until end-2010
Spain3.53.8Purchases: 1.8DI raised from €20,000 to €100,000 Guarantees on new debt issued by financial institutions until end-2010 (capped at €200 billion)
Sweden130.7DI raised from SEK 250,000 to SEK 500,000 Medium-term debt of banks and mortgage institutions (up to SEK 1.5 trillion)
Switzerland0.71.1Purchases: 6.7DI raised from SFr 30,000 to SFr 100,000
Ukraine9.24.5DI raised from UAH 50,000 to 150,000Prominvest (2008), Nadra, Inprom, Volodimrski, Dialog, Rodovid, Kiev, Ukrgaz (all 2009)
United Kingdom5.66.9Purchases: 16.3

Guarantees: 14.5
DI raised from £35,000 to 50,000

Guarantee on short- to medium-term debt (capped at £250 billion)

Blanket guarantee on Northern Rock and

Bradford & Bingley wholesale deposits
Northern Rock (2008); RBS (2008).
United States4.74.5Purchases: 13.0DI raised from $100,000 to $250,000 Money market funds (capped at $50 billion) Full guarantee on transaction deposits Newly issued senior unsecured debtFannie Mae, Freddie Mac, AIG (all 2008).
Sources: IMF staff reports, official websites, and authors’ calculations.

Greece’s fiscal cost includes the bank recapitalization funds for 23 percent of GDP included in the 2012 program. Since these funds will cover losses triggered by the debt exchange, we include them although they were not fully used as of May 2012.

For Portugal, the funds allocated for bank restructuring purposes are not included because they have not been used yet and it is unclear how much and when they will be used.

Includes liquidity support from the Treasury in the case of Austria, Denmark, Greece, Hungary, Kazakhstan, Latvia, the Netherlands, Russia, Slovenia, and the United Kingdom.

Sources: IMF staff reports, official websites, and authors’ calculations.

Greece’s fiscal cost includes the bank recapitalization funds for 23 percent of GDP included in the 2012 program. Since these funds will cover losses triggered by the debt exchange, we include them although they were not fully used as of May 2012.

For Portugal, the funds allocated for bank restructuring purposes are not included because they have not been used yet and it is unclear how much and when they will be used.

Includes liquidity support from the Treasury in the case of Austria, Denmark, Greece, Hungary, Kazakhstan, Latvia, the Netherlands, Russia, Slovenia, and the United Kingdom.

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1The authors thank Ashok Bhatia, Luis Brandao, Mali Chivakul, Charalambos Christofides, Stijn Claessens, Luis Cortavarria-Checkley, Enrica Detragiache, Lorenzo Forni, Gary Gorton, Phil de Imus, Yuko Kinoshita, Toshiyuki Miyoshi, Marialuz Moreno Badia, Iva Petrova, Dmitriy Rozhkov, and Gonzalo Salinas for comments and suggestions, and Jeanne Verrier for excellent research assistance. The views expressed in this paper do not necessarily represent those of the IMF or IMF Board.
2We express our measure of fiscal costs in terms of GDP rather than the size of a country’s financial system to control for the ability of a country’s economy to support its financial system. This naturally results in higher measured fiscal costs for economies with larger financial systems. We nevertheless also report, whenever available, fiscal costs expressed in percent of financial system assets.
3We exclude domestic non-deposit liabilities from the denominator of this ratio because information on such liabilities is not readily available on a gross basis. For euro area countries, we also consider liquidity support to be extensive if in a given semester the increase in this ratio is at least 5 percentage points. The reason is that data on euro area central bank claims are confounded by large volumes of settlements and cross-border claims between banks in the Eurosystem. As a result, the central banks of some euro area countries (notably Germany and Luxembourg) had already large pre-crisis levels of claims on the financial sector.
4Asset purchases also provide liquidity to the system. Therefore, an estimate of total liquidity injected would include schemes such as the Special Liquidity Scheme (185 bn pounds sterling) in the United Kingdom and Norway’s Bond Exchange Scheme (230 bn kronas), as well as liquidity provided directly by the Treasury.
5Although we do not consider a quantitative threshold for this criteria, in all cases guarantees involved significant financial sector commitments relative to the size of the corresponding economies.
6Monthly crisis dates (including the start of the crisis, the date when the crisis became systemic, and the date when liquidity support peaked) can be found in the companion data file to this paper.
7Following Dell’ Ariccia et al. (2012), we define credit boom years as those during which the deviation of credit-to-GDP ratio relative to its trend is greater than 1.5 times its historical standard deviation and its annual growth rate exceeds 10 percent, or years during which the annual growth rate of the credit-to-GDP ratio exceeds 20 percent. A country-specific cubic trend is computed over the preceding 10-year period.
8We compute exchange rate depreciation as the percent change of the end-of-period official nominal bilateral dollar exchange rate from the World Economic Outlook (WEO) database of the IMF. For countries that meet the currency crisis criteria for several continuous years, we use the first year of each 5-year window to identify the crisis.
9While Greece has not had a unilateral default, the restructuring of its debt involved using collective action clauses which amounted to a credit event for CDS purposes. Therefore, we consider it a sovereign debt crisis.
10We define a twin crisis in year t as a banking crisis in year t, combined with a currency (sovereign debt) crisis during the period [T-1, T+1], and we define a triple crisis in year t as a banking crisis in year T, combined with a currency crisis during the period [T-1, T+1] and a sovereign debt crisis during the period [T-1, T+1]. Identifying the overlap between banking (currency) and sovereign crises follows the same approach, with T the year of a banking (currency) crisis.
11Comparisons based on NPL data should be interpreted with caution given that definitions of NPLs vary markedly across countries.
12To compute fiscal costs we take the figures in domestic currency and divide by the GDP of the corresponding year when the outlays took place. For Greece, we include the recapitalization package included in the 2012 IMF program, although it had not been fully used as of May 2012.
13Output losses are computed as the cumulative sum of the differences between actual and trend real GDP over the period [T, T+3], expressed as a percentage of trend real GDP, with T the starting year of the crisis. Trend real GDP is computed by applying an HP filter (with λ=100) to the log of real GDP series over [T-20, T-1] (or shorter if data is not available, though we require at least 4 pre-crisis observations). Real GDP is extrapolated using the trend growth rate over the same period. Real GDP data are from the Fall 2011 WEO. This methodology is somewhat different than the one used in Laeven and Valencia (2008), which explains why the numbers changed.
14Our choice of data sources is guided by the availability of data on general government debt. When such data is not available, we use data on central government debt instead. Our primary data source is Abbas et al. (2010) for crisis episodes prior to 2007 and the Fall 2011 WEO for crisis episodes since 2007. When debt data are not available in Abbas et al. (2010), we use the OECD Analytical Database and IMF’s Government Finance Statistics.
15Liquidity support is computed as the ratio of central bank claims on deposit money banks (line 12 in IFS) to total deposits and liabilities to non-residents. Total deposits are computed as the sum of demand deposits (line 24), other deposits (line 25), and liabilities to non-residents (line 26). In the case of euro area economies, central bank claims on deposit money banks include Emergency Liquidity Assistance (ELA) operations conducted by national central banks within the Eurosystem.
16Data on reserve money come from IFS. For euro area countries, reserve money corresponds to the aggregation of currency issued and liabilities to depository corporations, divided by euro area GDP.
17We define the end of a crisis as the year before both real GDP growth and real credit growth are positive for at least two consecutive years. In case the first two years record positive growth in real GDP and real credit, the crisis end date equals the starting date of the crisis. In computing end dates, we use bank credit to the private sector (in national currency) from IFS (line 22d). Bank credit series are deflated using CPI from WEO. GDP in constant prices (in national currency) also comes from the WEO. When credit data is not available, the end date is determined as the first year before GDP growth is positive for at least two years. In all cases, we truncate the duration of a crisis at 5 years, starting from the first year of the crisis.
18Financial system assets data are taken from the World Bank’s Financial Structure database. They consist of domestic claims on the private sector by banks and non-bank financial institutions. They exclude foreign claims by banks and non-bank financial institutions. In the case of European Union countries, for which cross-border claims can be sizeable, we instead use data from the European Central Bank (ECB) on the consolidated assets of financial institutions (excluding the Eurosystem and other national central banks), after netting out the aggregated balance sheet positions between financial institutions. Moreover, in the case of Iceland where cross-border claims are also sizable we use the assets of monetary and other financial institutions obtained from its national central bank.
19Importantly, banking supervision and resolution are still largely a national affair in the euro area.

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