A. Banking Crises

We start with a definition of a systemic banking crisis. Under our definition, in a systemic banking crisis, a country’s corporate and financial sectors experience a large number of defaults and financial institutions and corporations face great difficulties repaying contracts on time. As a result, non-performing loans increase sharply and all or most of the aggregate banking system capital is exhausted. This situation may be accompanied by depressed asset prices (such as equity and real estate prices) on the heels of run-ups before the crisis, sharp increases in real interest rates, and a slowdown or reversal in capital flows. In some cases, the crisis is triggered by depositor runs on banks, though in most cases it is a general realization that systemically important financial institutions are in distress.

Using this broad definition of a systemic banking crisis that combines quantitative data with some subjective assessment of the situation, we identify the starting year of systemic banking crises around the world since the year 1970. Unlike prior work (Caprio and Klingebiel, 1996, and Caprio, Klingebiel, Laeven, and Noguera, 2005), we exclude banking system distress events that affected isolated banks but were not systemic in nature. As a cross-check on the timing of each crisis, we examine whether the crisis year coincides with deposit runs, the introduction of a deposit freeze or blanket guarantee, or extensive liquidity support or bank interventions.⁶ This way we are able to confirm about two-thirds of the crisis dates. Alternatively, we require that it becomes apparent that the banking system has a large proportion of nonperforming loans and that most of its capital has been exhausted.⁷ This additional requirement applies to the remainder of crisis dates.

In sum, we identify 124 systemic banking crises over the period 1970 to 2007. This list is an updated, corrected, and expanded version of the Caprio and Klingebiel (1996) and Caprio, Klingebiel, Laeven, and Noguera (2005) banking crisis databases. Table 1 lists the starting year of each banking crisis, as well as some background information on each crisis, including peak nonperforming loans (percent of total loans), gross fiscal costs (percent of GDP), output loss (percent of GDP), and minimum real GDP growth rate (in percent). Peak nonperforming loans is the highest level of nonperforming loans as percentage of total loans during the first five years of the crisis. Gross fiscal costs are computed over the first five years following the start of the crisis using data from Hoelscher and Quintyn (2003), Honohan and Laeven (2003), IMF Staff reports, and publications from national authorities and institutions. Output losses are computed by extrapolating trend real GDP, based on the trend in real GDP growth up to the year preceding the crisis, and taking the sum of the differences between actual real GDP and trend real GDP expressed as a percentage of trend real GDP for the first four years of the crisis (including the crisis year).⁸ Minimum real GDP growth rate is the lowest real GDP growth rate during the first three years of the crisis.

Table 1.

Timing of Systemic Banking Crises

Table 1.

Timing of Systemic Banking Crises

Country	Systemic banking crisis (starting date)	Share of NPLs at peak (%)	Gross fiscal cost (% of GDP)	Output loss (% of GDP)	Minimum real GDP growth rate (%)	Comments
Albania	1994	26.8			-7.2	Rapid growth in nonperforming loans, reaching 26.8% of total loans in 1994, following the creation of a two-tier commercial banking system in 1992.
Algeria	1990	30		6.7	-2.1	In 1989, five government-owned banks were granted managerial and financial autonomy from the central government. In the transition to a market economy, nonperforming loans (about 30% of total loans) created problems for some banks in 1990, and the Central bank had to provide discount financing to these banks.
Argentina	1980	9	55.1	10.8	-5.7	In March 1980 a number of financial institutions were forced to rely heavily on Central Bank financial assistance when faced with deposit withdrawals. Failed institutions included the largest investment bank and the second largest private commercial bank. More than 70 institutions (accounting for 16% of commercial bank assets and 35% of finance company assets) were liquidated or subjected to intervention between 1980 and 1982.
Argentina	1989	27	6	10.7	-7.0	During the 1980s, a decline in the availability of external resources led to an increased recourse to domestic financing. To fund its credit operations the Central Bank imposed reserve and investment requirements on deposits. They were replaced by frozen deposits at the Central Bank in August 1988. Central bank debt grew through the issuance of short-term paper (CEDEPS) to financial entities for purposes of monetary control. The Central Bank accelerated its placement of CEDEPS which by midyear were being issued to finance interest payments on the Central Bank’s own debt. By mid-1989 the quasi-fiscal deficit of the Central Bank reached almost 30% of GDP, although most of it was reversed by end-year. On January 1, 1990, the Government announced the bond conversion of time deposits and public sector debt coming due in 1990 (BONEX 89). The Central Bank kept liquidity tight and by end-February interest rates reached over 1000% a month for 7-day term deposits.
Argentina	1995	17	2	7.1	-2.8	After the Mexican devaluation, a small bond trader experienced a liquidity squeeze pushing it to closure by mid-January 1995. This development persuaded most banks to cut credit to bond traders, which in turn affected banks with large bond and open trading positions. Furthermore, provincial banks were having difficulties in raising funds and people started moving funds towards larger banks, in particularly foreign, perceived as more solvent, and by March 1995 capital flights intensified. Several measures were implemented at alleviating liquidity pressures. Eight banks were suspended and three banks collapsed. Out of the 205 banks in existence as of end of 1994, 63 exited the market through mergers, absorptions, or liquidation by end 1997.
Argentina	2001	20.1	9.6	42.7	-10.9	In March 2001, a bank run started due to increasing doubts about the sustainability of the currency board, strong opposition from the public to the new fiscal austerity package sent to the Congress, the resignation of president of the Central Bank, and the amendment to the convertibility law (change in parity from being pegged to the dollar, to being pegged to a basket composed of the US dollar and Euro). During the second half of 2001, bank runs intensified. On December 3, 2001, as several banks were at the verge of collapsing, partial withdrawal restrictions (corralito) were imposed to transactional accounts while fixed-term deposits (CDs) were reprogrammed (corralon) in order to stop outflows from banks. On February 4, 2002, bank assets were asymmetrically pesified adversely affecting the solvency of the banking system. In 2002, two voluntary swaps of deposits for government bonds were offered but received little interest by the public. In December 2002, the corralito was lifted. By August 2003, one bank has been closed, three banks nationalized, and many other have reduced their staff and branches.
Armenia	1994				3.3	Starting in August 1994, the Central Bank closed half of active banks. Large banks continued to suffer from high nonperforming loans. The savings bank was financially weak.
Azerbaijan	1995				-13.0	Twelve private banks closed; three large state-owned banks deemed insolvent; one large state-owned bank faced serious liquidity problems.
Bangladesh	1987	20		34.7	2.4	In 1987 four banks accounting for 70% of credit had nonperforming loans of 20%. From the late 1980s the entire private and public banking system was technically insolvent.
Belarus	1995				-11.3	Many banks undercapitalized; forced mergers burdened some banks with poor loan portfolios.
Benin	1988	80	17	1.9	-2.8	All three commercial banks collapsed.
Bolivia	1986	30		0.0	-2.6	Five banks were liquidated. Banking system nonperforming loans reached 30% in 1987; in mid-1988 reported arrears stood at 92% of commercial banks’ net worth.
Bolivia	1994	6.2	6	0.0	4.4	Two banks with 11% of banking system assets were closed in 1994. In 1995, 4 of 15 domestic banks, accounting for 30% of banking system assets, experienced liquidity problems and suffered high nonperforming loans.
Bosnia and Herzegovina	1992				-6.4	Banking system suffers from high nonperforming loans due to the breakup of the former Yugoslavia and the civil war.
Brazil	1990		0	12.2	-4.2	Deposits were converted to bonds. Liquidity assistance to public financial institutions.
Brazil	1994	16	13.2	0.0	2.1	The Brazilian economy entered a new phase with the implementation of the “Plan Real” in July 1994. The plan triggered a major process of structural changes, which aimed primarily at lowering inflation. With this process, a remonetization of the economy took place and with it, liabilities and assets of banks expanded rapidly—loans to private sector grew by 60% during the first year of the plan--despite higher reserve requirements. At the same time a sharp deterioration in the trade account took place, to which the central bank responded by raising interest rates and imposed credit restrictions. The financial situation of banks weakened as bad loans increased noticeably and also because they lost their inflation revenues. The problems were particularly more acute at public banks. For federal banks, the ratio of loans in arrears and in liquidation to total loans increased from 15.4 percent in June 1994 to 22.4 percent at end-1995, and to slightly more than 30 percent in October 1996. For state- owned banks the ratio increased from 8 percent to almost 12 percent and more than 14 percent for the same dates. For private banks, the ratio increased from 5 percent in June 1994 to 9 percent in December 1995. The problems in the banking sector triggered a restructuring of public banks and the resolution of private institutions. Most of the closures were medium to small-sized banks, while large banks were resolved under a “good bank/bad bank” approach.
Bulgaria	1996	75	14	1.3	-8.0	The 1996 banking crisis had its roots in bad loans made during 1991-1995, but the deepening insolvency of the system was not reflected in sustained liquidity problems until the second half of 1994. Two ailing state banks required ongoing refinancing from the Bulgarian National Bank (BNB) and the State Savings Bank (SSB) until they were bailed out in mid-1995. The public began to lose confidence in banks after the collapse of pyramid schemes in some cities, and in response to reports on the ill health of other banks. In late 1995 withdrawals of deposits, especially from First Private Bank (the largest private bank), were reflected in substantial BNB refinancing and falling foreign reserves. By early 1996 the sector had a negative net worth equal to 13% of GDP. The banking system experienced a run in early 1996. The government then stopped providing bailouts, prompting the closure of 19 banks accounting for one-third of sector assets. Surviving banks were recapitalized by 1997.
Burkina Faso	1990	16		45.2	-0.6	In 1989, the system of sectoral credit ratios was abolished, and deposit and lending rates were partially liberalized. During 1990, the financial condition of the banking sector deteriorated sharply. Nonperforming loans increased to 23 percent of total credit, and commercial banks’ deposits in the money market declined sharply. Three major commercial banks urgently needed restructuring, while two other large banks continued to experience liquidity problems. In 1991, the government merged these three major commercial banks into one bank with minority government participation and rehabilitated the two other banks, while assuming nonperforming assets.
Burundi	1994	25		66.3	-8.0	In 1995 one bank was liquidated.
Cameroon	1987	65		118.1	-7.9	Five commercial banks were closed and three banks were restructured.
Cameroon	1995	30		0.0	3.3	Three banks were restructured and two were closed.
Cape Verde	1993	30		0.0	6.7	In 1993, the former monobank was split into a Central Bank and a commercial bank, with 90 percent of banking system deposits. The commercial bank had accumulated a large fraction of nonperforming assets and was recapitalized by the government in 1994 by converting its portfolio of nonperforming loans into interest-bearing notes to the equivalent of 17.5 percent of GDP. All commercial banking interest rates were liberalized in 1994, with the exception of one benchmark interest rate on time deposits.
Central African Rep.	1976			0.0	2.5	Four banks were liquidated.
Central African Rep.	1995	40		1.1	-8.1	The two largest banks, accounting for 90% of assets, were restructured.
Chad	1983			0.0	5.3	All banking offices closed in 1979 and 1980 when N’Djamena was the scene of heavy fighting. Banking sector experienced solvency problems. With the collapse of world cotton prices in 1985, Cotontchad’s revenues dropped, and foreign exchange flowing into Chad declined. As a result, the BEAC’s exchange reserves dropped precipitously in 1986. Operations in the banking sector ground to a halt as Cotontchad fell into arrears on repayments of its shortterm debt. In late 1986, the BEAC negotiated a rescheduling of some three-fourths of the short-term debt, allowing a ten-year maturity, including a five-year grace period with an interest rate of 6%. In 1983 the government imposed a five-year moratorium that froze all deposits and outstanding credits before 1980. The moratorium’s purpose was to prevent a run on banks and to staunch capital flight when banks restored operations in early 1983 under the new government.
Chad	1992	35		37.2	-2.1	The Chadian banking system came close to collapse in 1992, owing mainly to the vulnerable state of the economy and an expansionary credit policy. To avoid a major financial crisis, the monetary authorities embarked on a comprehensive rehabilitation program of the banking system, involving enhancement of central bank supervision through the COBAC, and the liberalization of banking activity. In addition, they eased the liquidity crisis of the commercial banks in 1993 by consolidating into a long-term loan to the Government the rediscounted commercial bank loans that had been extended mainly to public enterprises. Credit policy was tightened; the amount of direct advances to the Treasury by the Central Bank was stabilized; and the Banque Internationale pour le Commerce et 1’Industrie du Tchad was liquidated. As a result, the net foreign assets position of the banking system was strengthened and the liquidity position of the banks was gradually restored.
Chile	1976			0.0	3.5	Entire mortgage system insolvent.
Chile	1981	35.6	42.9	92.4	-13.6	By the end of 1981, a 6-year expansionary period ended abruptly. High international interest rates, a world recession, lower copper prices, and an abrupt cut of voluntary foreign credit to Latin America pushed Chile into a costly economic crisis. The problems were agravated by unsound financial practices among banks, which included substantial connected lending ranging from 12 to 45% of the total loans portfolio. The financial system was affected in two waves. The first one in 1981-82 including 11 liquidations (banks and finance companies), where all depositors were protected. The second one in 1983, involved liquidations and rehabilitations and in the liquidation cases, domestic depositors were compensated only partially. While foreign creditors were offered the same compensation, they threatened by cutting trade credit lines and were ultimately restructured under the external debt restructuring plan.
China, P.R.	1998	20	18	36.8	7.6	At the end of 1998 China’s four large state-owned commercial banks, accounting for 68% of banking system assets, were deemed insolvent. Banking system NPL’s in 2002 and 2003 were 20 % and 15% respectively of total loans. The restructuring cost to date is around RMB1.8 trillion based on estimates of capital injections and loans to AMCs to purchase assets, or 18% of 2002 GDP.
Colombia	1982	4.1	5	15.1	0.9	During the early 1980s, an economic downturn affected the profitability of the banks. They came under pressure as the 1981 recession intensified. This, in turn, caused a sharp deterioration in asset quality through an increase in defaults. Colombia began experiencing capital outflows. Subsequent bank failures and nationalizations generated widespread decline in public confidence which led to a massive government intervention.The Central Bank intervened in six banks accounting for 25% of banking system assets, and in 8 finance companies.
Colombia	1998	14	6.3	33.5	-4.2	Capital account reversal during the first half of 1998 triggered by pressures in emerging markets led to a response from the Central Bank oriented towards defending the currency. As a result, interest rates increased in real terms, harming the quality of banks’ loan portfolios and putting a downward pressure on asset prices and hence on the value of collateral, especially real estate. The already weak large public banks faced a severe asset quality deterioration which spread to private banks and other financial entities.
Congo, Dem. Rep. of	1983			0.0	0.5	Banking sector experienced solvency problems.
Congo, Dem. Rep. of	1991			81.0	-13.5	Four state-owned banks were insolvent; a fifth bank was to be recapitalized with private participation.
Congo, Dem. Rep. of	1994	75		,	-5.4	Two state-owned banks have been liquidated and two other state banks privatized. In 1997, 12 banks were having serious financial difficulties.
Congo, Rep. of	1992			63.2	-5.5	Between 2001 and 2002, two large banks were restructured and privatized. The remaining insolvent bank is in the process of being liquidated. Situation aggravated by the civil war.
Costa Rica	1987			0.0	3.4	In 1987, public banks accounting for 90% of total banking system loans in financial distress as 32% of their loans considered uncollectible. Implied losses of at least twice the capital plus reserves. Pressure on banks to negotiate a “Brady” settlement of foreign debt; settlement reached 11/89 at 16 cents/dollar. Budgetary relief to government enables restructuring of state bank debts.
Costa Rica	1994	32		1.6	0.9	One large state-owned commercial bank with 17% of deposits 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. Implied losses of at least twice the capital plus reserves.
Côte d’Ivoire	1988	50	25	0.0	-1.1	The recession of 1987 and problems with the cocoa and coffee markets (main exports) substantially increased private sector’s non-performing loans. These problems were aggravated by a large amount of nonperforming loans in the public enterprise sectors, the large accumulation of government payment arrears, the substantial decline in public and private deposits in the banking system, reduction in credit lines from abroad, and poor management in some banks. Four large banks affected, accounting for 90% of banking system loans; three definitely and one possibly insolvent. Six government banks closed.
Croatia	1998	10.5	6.9	0.0	-0.9	The introduction of a market-oriented legal framework in the early 1990s, led to significant progress in establishing a modern banking system. The banking sector expanded vigorously until end-1997. Meanwhile, the incentives for sound bank behavior had not yet been fully established, coupled with bad debt problems inherited from the old regime. These weaknesses were in part addressed with the Bank rehabilitation plan (Law of 1994) implemented in 1996-1997. Four state-owned banks, accounting for 46 percent of total bank assets (as of 1995) entered rehabilitation, with an overall cost of 6.1% of GDP. However, a new wave of problems began in March 1998 with the failure of the 5th largest bank, Dubrovacka (5% of total assets). Problems at this bank triggered political turmoil, which in turn induced runs at other banks, perceived indirectly related to Dubrovacka. In july 1998, the sixth largest bank ran into problems and several medium- and small-sized institutions experienced liquidity difficulties in the fall of 1998 and early 1999 as well
Czech Republic	1996	18	6.8		-0.8	In 1994, a small bank failed (Banka Bohemia), due to fraud. While all depositors were covered, a partial deposit insurance coverage was introduced shortly after this first failure. The likelihood of facing material losses triggered runs at other small banks, until by the end of 1995, 2 small banks failed (Ceska and AB Banka), which triggered a second phase of bank restructuring starting in 1996, aimed at 18 small banks (9% of industry’s assets).
Djibouti	1991			22.6	-6.7	Two of six commercial banks ceased operations in 1991–92; other banks experienced difficulties.
Dominican Republic	2003	9	22	15.5	-1.9	In April 2003 Central bank took over Baninter (Banco Intercontinental) which declared bankruptcy in May and dissolved in July. Baninter’s liabilities exceeded its assets by 55 billion pesos ($2.2 billion) and 15% of GDP. The central bank had been providing liquidity support to Baninter since September 2002. Two other banks Bancredito and Banco Mercantil were also given liquidity support from the Central Bank to deal with deposit withdrawals.
Ecuador	1982			13.6	-2.8	Program exchanging domestic for foreign debt implemented to bail out banking system.
Ecuador	1998	40	21.7	6.5	-6.3	Seven financial institutions, accounting for 25–30% of commercial banking assets, were closed in 1998–99. In March 1999 bank deposits were frozen for 6 months. By January 2000, 16 financial institutions accounting for 65% of the assets had either been closed (12) or taken over (4) by the government. All deposits were unfrozen by March 2000. In 2002 the blanket guarantee was lifted.
Egypt	1980			38.1	2.2	The government closed several large investment companies.
El Salvador	1989	37		0.0	1.0	Nine state-owned commercial banks had nonperforming loans averaging 37%.
Equatorial Guinea	1983			0.0	-2.3	Two of the country’s largest banks were liquidated.
Eritrea	1993				2.3	Most of the banking system was insolvent.
Estonia	1992	7	1.9		-21.6	Banking problems surfaced in November 1992 when the state-owned North Estonian Bank (NEB), the Union Baltic Bank (UBB), and the Tartu Commercial Bank (TCB) exhibited serious liquidity problems and delayed payments by three weeks. A second episode of stress took place in early 1994, when the government reduced the level of its deposits from the Social Bank. The Social Bank, which controlled 10% of financial system assets, failed. Five banks’ licenses were revoked, and two major banks were merged and nationalized. Two other large banks were merged and converted to a loan recovery agency.
Finland	1991	13	12.8	59.1	-6.2	The three Nordic countries went through a financial liberalization process that led to a lending boom. However, they also suffered the adverse consequences of higher German interest rates. In the case of Finland, the problems were exacerbated by the collapse of exports to the Soviet Union. The first bank in trouble was Skopbank, which was taken over by the Central Bank in September 1991. Savings banks badly affected; government took control of three banks that together accounted for 31% of system deposits.
Georgia	1991	33			-44.9	Largest banks virtually insolvent.
Ghana	1982	35	6	15.8	-6.9	During most of the 80’s Ghana suffered severe structural imbalances related to the cumulative impact of large budgetary deficits, rapid increase in domestic bank credit, a fixed exchange rate, high inflation, which authorities aimed controlling through price controls. These policies were exacerbated by a deterioration of capital equipment and inadequate prices incentives in agricultural and export sectors. As a result, real output in 1981 was 15 percent lower than its 1974 level. The situation deteriorated further towards the second half of the 1980’s due to high fiscal deficits, financed primarily through domestic credit, directed credit policies (since 1981 banks were obliged to lend at least 20% of their portfolio to the agricultural sector), a deterioration in cocoa exports, and a large depreciation of the currenty (a 1173% depreciation took place in 1983). Banks experienced liquidity pressures, but in addition to that, there were defficiencies in banking supervision and regulation. As a result, 7 out of the 11 banks were insolvent and the problems were addressed by capitalization and purchase of NPL’s.
Guinea	1985		3	0.0	3.1	Six banks—accounting for 99% of system deposits—deemed insolvent. Repayment of deposits amounted to 3% of 1986 GDP.
Guinea	1993	45		0.0	4.0	Two banks deemed insolvent; one other bank had serious financial difficulties.
Guinea-Bissau	1995	45		22.8	-27.2	At end-1996, the Central Bank’s had a negative capital position and Guinea-Bissau’s two commercial banks had substantial nonperforming loans. In March-April 1997, the treasury recapitalized the Central Bank.
Guyana	1993			0.0	5.1	Prior to financial reforms starting in 1989, directed credit programs had resulted in investments with low rates of return and large nonperforming loans for the banks. State-owned banks were merged in May 1995 and a state-owned loan-recovery institution was subsequently established to recover the nonperforming loans of the merged bank.
Haiti	1994			9.3	-11.6	The Central Bank registered considerable losses as the majority of its assets, represented by credit to the government, were nonperforming.
Hungary	1991	23	10		-11.9	In the second half of 1993, 8 banks (25% of financial system assets) deemed insolvent.
India	1993	20		3.1	4.9	Nonperforming assets reached 11% in 1993–94. Nonperforming assets of the 27 public banks estimated at 20% in 1995. At the end of 1998 nonperforming loans estimated at 16% and at the end of 2001 they decreased to 12.4%.
Indonesia	1997	32.5	56.8	67.9	-13.1	Through May 2002, Bank Indonesia had closed 70 banks and nationalized 13, of a total of 237. Official nonperforming loans for the banking system were estimated at 32.5% of total loans at the peak of crisis.
Israel	1977		30	0.0	1.0	Almost the entire banking sector was affected, representing 60% of stock market capitalization. The stock exchange closed for 18 days, and bank share prices fell more than 40%.
Jamaica	1996	28.9	43.9	30.1	-1.2	In 1994 a merchant banking group (Blaise Group) was closed. In 1996, FINSAC, a government resolution agency, provided assistance to 5 banks, 5 life insurance companies, 2 building societies, and 9 merchant banks. Government recapitalized 21 troubled institutions via non-tradable government guaranteed bonds. By June 30, 2000 outstanding recap bonds estimated to account for 44% of GDP.
Japan	1997	35	14	17.6	-2.0	Banks suffered from sharp decline in stock market and real estate prices. In 1995 the official estimate of nonperforming loans was 40 trillion yen ($469 billion, or 10% of GDP). An unofficial estimate put nonperforming loans at $1 trillion, equivalent to 25% of GDP. Banks made provisions for some bad loans. At the end of 1998 banking system nonperforming loans were estimated at 88 trillion yen ($725 billion, or 18% of GDP). In 1999 Hakkaido Takushodu bank was closed, the Long Term Credit Bank was nationalized, Yatsuda Trust was merged with Fuji Bank, and Mitsui Trust was merged with Chuo Trust. In 2002 nonperforming loans were 35% of total loans; with a total of 7 banks nationalized, 61 financial institutions closed and 28 institutions merged. In 1996 rescue costs were estimated at more than $100 billion. In 1998 the government announced the Obuchi Plan, which provided 60 trillion yen ($500 billion, or 12% of GDP) in public funds for loan losses, bank recapitalizations, and depositor protection. By 2002 fiscal cost estimates rose to 24% of GDP.
Jordan	1989		10	66.6	-10.7	The third largest bank failed in August 1989. The central bank provided overdrafts equivalent to 10% of GDP to meet a run on deposits and allowed banks to settle foreign obligations.
Kenya	1985			0.0	4.1	Four banks and twenty-four nonbank financial institutions—accounting for 15% of financial system liabilities—faced liquidity and solvency problems.
Kenya	1992			23.0	-1.1	Intervention in two local banks.
Korea	1997	35	31.2	50.1	-6.9	The devaluation of the Thai baht in July 1997, the subsequent regional contagion, and the crash of the Hong Kong stock market sent shock waves to the Korean financial system. Korea’s exchange rate remained broadly stable through October 1997. However, the high level of short-term debt and the low level of usable international reserves made the economy increasingly vulnerable to shifts in market sentiment. While macroeconomic fundamentals continued to be favorable, the growing awareness of problems in the financial sector and in industrial groups (chaebols) increasingly led to the difficulties for the banks in rolling over their short-term borrowing. Through May 2002, 5 banks were forced to exit the market through “purchase and assumption” and 303 financial institutions shutdown (215 were credit unions); another 4 banks were nationalized.
Kuwait	1982	40		0.0	-9.5	Share dealings using postdated checks created a huge unregulated expansion of credit. The crash of the unofficial stock market finally came in 1982, when a dealer presented a postdated check for payment and it bounced. A house of cards collapsed. Official investigation revealed that total outstanding checks amounted to the equivalent of US$94 billion from about 6,000 investors. Kuwait’s financial sector was badly shaken by the crash, as was the entire economy. The crash prompted a recession that rippled through society as individual families were disrupted by the investment risks of particular members made on family credit. The debts from the crash left all but one bank in Kuwait technically insolvent, held up only by support from the Central Bank. Only the National Bank of Kuwait, the largest commercial bank, survived the crisis intact. In the end, the government stepped in, devising a complicated set of policies, embodied in the Difficult Credit Facilities Resettlement Program. The implementation of the program was still incomplete in 1990 when the Iraqi invasion changed the entire financial picture.
Kyrgyz Republic	1995	85			-5.8	In 1995, over half of the commercial banks had a negative net worth. The public lostv confidence in the banking system, and many people withdrew their funds, leading many of the banks to go out of business. License of five small banks were withdrawn in 1994-95. 2 banks were closed in 1999, following the Russian crisis.
Latvia	1995	20	3		-2.1	Between 1994 and 1999, 35 banks saw their license revoked, were closed, or ceased operations. In 1995 the negative net worth of the banking system was estimated at $320 million, or 7% of 1995 GDP. Aggregate banking system losses in 1998 estimated at 100 million lats ($172 million), about 3% of GDP.
Lebanon	1990			4.2	-13.4	Four small and medium-size banks became insolvent. Eleven had to resort to significant Central Bank lending. Bank of Lebanon claims on commercial banks reached LL 145 billion in September 1990 (equivalent to 31% of reserve money).
Liberia	1991				0.0	Seven of eleven banks not operational; in mid-1995 their assets accounted for 64% of bank assets.
Lithuania	1995	32.2	3.1		1.2	In 1995, of 25 banks, 12 small banks were liquidated, 3 private banks (accounting for 29% of banking system deposits) failed, and 3 state-owned banks were deemed insolvent.
Macedonia	1993	70	32		-7.5	The government took over banks’ foreign debt and closed the second largest bank. Costs of banking system rehabilitation, obligations from assumption of external debt, liabilities regarding frozen foreign exchange, and contingent liabilities in banks together estimated at 32% of GDP.
Madagascar	1988	25		0.0	-6.3	After the formal abandonment in 1985 of the previous policy of bank specialization and the appointment in 1986 of separate boards of directors to replace the single board that was share by all commercial banks, the rehabilitation of the banking system gained speed with the enactment in 1988 of a new banking law, which opened he system to private capital, and the decision in 1989 to write off most of the nonperforming loans of the existing banks.
Malaysia	1997	30	16.4	50.0	-7.4	The persistent pace of credit expansion at an annual rate of nearly 30 percent to the private sector, in particular to the property sector and for the purchase of stocks and hares, exposed the financial system to potential risks from price declines in property and other assets that occurred in 1997. In the wake of market turbulence and contagion effects in the second half of 1997, concerns among market participants about the true condition and resilience of the financial system increasingly became a central issue, highlighted by the known fragilities among finance companies. Finance company sector was restructured, and number of finance was reduced from 39 to 10 through mergers. Two finance companies were taken over by the Central Bank, including the largest independent finance company. Two banks deemed insolvent—accounting for 14% of financial system assets—will be merged with other banks. Nonperforming loans peaked between 25–35% of banking system assets and fell to 10.8% by March 2002.
Mali	1987	75		5.7	-0.3	Mali’s economic and financial prospects for 1986 and the medium term changed significantly due to the collapse in late 1985 of the world market price of cotton, Mali’s major export commodity. In 1987, although the Government undertook some corrective measures, the economic and financial situation deteriorated rapidly. The expansion of credit was significantly higher than programmed, and as a result, nonperforming loans at banks increased rapidly. Owing primarily to the overexposure of the largest commercial bank in terms of its loans and guaranteed letters of credit, a liquidity crunch emerged in the banking system. The financial situation of the largest commercial bank deteriorated further in 1987, reflecting the heavy losses of the public enterprise sector that it had financed over the years, defaults by the private sector on unsecured loans, and inappropriate management. By mid-November 1997, the bank had become virtually illiquid and ceased functioning normally. Its nonperforming loans amounted to some 70 percent of its outstanding credit.
Mauritania	1984	70	15	0.0	2.0	In 1984 five major banks had nonperforming assets ranging from 45–70% of their portfolios.
Mexico	1981			51.3	-3.5	Government took over troubled banking system.
Mexico	1994	18.9	19.3	4.2	-6.2	Of 34 commercial banks in 1994, 9 were intervened and 11 participated in the loan/purchase recapitalization program. The 9 intervened banks accounted for 19% of financial system assets and were deemed insolvent. By 2000, 50% of bank assets were held by foreign banks.
Morocco	1980			29.8	-2.8	Banking sector experienced solvency problems. Debt crisis 1980-83
Mozambique	1987			0.0	1.0	Main commercial bank experienced solvency problems that became apparent after 1992.
Nepal	1988	29		0.0	4.3	Nonperforming loans increased sharply during 1988-89 at the two largest commercial banks. Both banks are majority government-owned and together account for more than 90 percent of bank assets and deposits. In 1989, loan recovery programs were put in place for these two commercial banks.
Nicaragua	1990	50		0.0	-0.4	During the 1980’s, lending rates were subsidized and often set below deposit rates. Deposit rates were for the most part negative in real terms and contributed to a severe contraction of the banks’ deposit base. The Central Bank provided much of the funding for commercial banks, mainly by intermediating foreign loans and donations. Lack of bank supervision and prudential controls resulted in risky; ending and contributed to the large percentage of nonperforming loans in banks’ portfolios. In 1990, financial sector problems were acknowledged by a new government. In 1992, a financial reform package was announced to confront these problems. The state banking system was recapitalized and reorganized starting in 1992.
Nicaragua	2000	12.7	13.6	0.0	0.8	The largest bank in Nicaragua, Interbank, was found to have committed fraud and therefore was intervened in August 2000. Following the intervention, full protection for its depositors was announced. However, withdrawals continued until the bank was finally resolved in Oct. 2000 through a P&A. Another institution ran into problems soon after the resolution of Interbank. Runs against other banks occurred in part because the authorities announced limited coverage of its depositors. However, in its resolution a few days later, all depositors were protected. Two institutions more were resolved a few months later. All banks were resolved under P&A’s and a blanket guarantee was passed by law after the first two failures.
Niger	1983	50		,	-16.8	In the mid-1980s banking system nonperforming loans reached 50%. Four banks were liquidated and three restructured in the late 1980s. In 2002, a new round of bank restructuring was launched. Four banks were experiencing serious difficulties. Two of them were to be restructured and the other two might be liquidated.
Nigeria	1991	77		0.4	-0.6	In 1993 insolvent banks accounted for 20% of banking system assets and 22% of deposits. In 1995 almost half the banks reported being in financial distress.
Norway	1991	16.4	2.7	0.0	2.8	Financial deregulation undertaken during 1984-1987 led to a credit boom (with real rates of credit growth of 20% y-y), accompanied by a boom in both residential and non-residential real estate. In 1985 oil prices fell sharply, turning a 4.8 percent surplus in the current account into a 6.2% deficit in 1986 with ensuing pressures on the exchange rate. Meanwhile, rate increases by the Bundesbank following the reunification of Germany, forced Norway to keep interest rates high throughout the economic recession, which started in 1988. Problems at small banks that began in 1988 were addressed via mergers and assistance from the guarantee fund, funded by banks. However, by 1990 the fund had been depleted and the financial condition at large banks began to deteriorate. The turmoil reached systemic proportions by October 1991, when the second and fourth largest banks had lost a considerable amount of equity.
Panama	1988			37.8	-13.4	As a result of severe US-led economic sanctions, including the freezing of Panamanian assets in U.S. banks, a nine-week banking holiday was declared beginning in March 1988. As a result of these developments, the financial position of most state-owned and private commercial banks was substantially weakened and 15 banks ceased operations.
Paraguay	1995	8.1	12.9	0.0	0.4	During the early nineties, the banking system remained undercapitalized and non- performing loans rose sharply, coupled together with insider lending practices. Already in 1989, an assessment by the superintendency revealed that about one third of the banking system was insolvent. The crisis began in May 1995 when the third and fourth largest banks could not meet clearing obligations and were intervened. The first line of response was liquidity support. However, as the crisis unfolded, an important amount of unrecorded deposits were discovered. A blanket guarantee covering intervened banks was announced, but pressures remained because at first, the guarantee covered only legitimate deposits, although later, all deposits were protected. Through a series of interventions, closures and substantial liquidity support, the distress period lasted until 1999. In the end, between 1995-1999, 15 out of the 19 locally-owned banks were either closed or absorbed by stronger institutions. By 1999 banks were predominantly foreign owned.
Peru	1983			25.5	-9.3	Two large banks failed. The rest of the system suffered from high nonperforming loans and financial disintermediation following the nationalization of the banking system in 1987.
Philippines	1983	19	3	60.1	-7.3	Problems in two public banks accounting for 50% of banking system assets, six private banks accounting for 12% of banking system assets, 32 thrifts accounting for 53% of thrift banking assets, and 128 rural banks.
Philippines	1997	20	13.2	0.0	-0.6	Since January 1998 one commercial bank, 7 of 88 thrifts, and 40 of 750 rural banks have been placed under receivership. Banking system nonperforming loans reached 12% by November 1998, and were expected to reach 20% in 1999.
Poland	1992	24	3.5		2.0	In 1991 seven of nine treasury-owned commercial banks—accounting for 90% of credit—the Bank for Food Economy, and the cooperative banking sector experienced solvency problems.
Romania	1990	30	0.6		-12.9	In 1998 nonperforming loans reached 25–30% in the six main state-owned banks. The Agricultural Bank was recapitalized on a flow basis. In 1998 the Central Bank injected $210 million in Bancorex (0.6% of GDP), the largest state bank, and in 1999 another $60 million.
Russia	1998	40	6	0.0	-5.3	From mid-1997 to April 1998, the Central Bank of Russia (CBR) was relatively successful in defending the fixed exchange rate policy through a significant tightening of credit. However, the situation became increasingly untenable when significant political turmoil in Russia-starting with the President’s dismissal of the government of Prime Minister Chernomyrdin and prolonged by a stalemate over the formation of a new cabinet-cast increasing doubt on the political resolve to come to grips with Russia’s fiscal problems. From mid-July, when the Duma refused to pass key fiscal measures, the situation deteriorated rapidly, leading to a unilateral restructuring of ruble-denominated treasury bills and bonds on August 17, 1998. The ruble was allowed to float three days later despite previous announcements that it wouldn’t be devalued. A large devaluation in real effective terms (over 300% in nominal terms), loss of access to international capital markets, and massive losses to the banking system ensued. However, well before the crisis, there was widespread recognition that the banking system had a series of weaknesses. In particular, bank reporting and bank supervision were weak, there was an excessive exposure to foreign exchange rate risk, connected lending, and poor management. Two key measures implemented were a 90-day moratorium on foreign liabilities of banks and the transfer of a large fraction of deposits from insolvent banks to Sberbank. Nearly 720 banks, or half of those now operating, were deemed insolvent. These banks accounted for 4% of sector assets and 32% of retail deposits.
São Tomé and Principe	1992	90		0.0	0.7	At the end of 1992, 90% of the monobank’s loans were nonperforming. In 1993 the commercial and development departments of the former monobank were liquidated, as was the only financial institution. At the same time, two new banks were licensed that took over many of the assets of their predecessors. The credit operations of one new bank have been suspended since late 1994.
Senegal	1988	50	17	25.4	-0.7	In 1988, 50% of banking system loans were nonperforming. Six commercial banks and one development bank closed, accounting for 20–30% of financial system assets.
Sierra Leone	1990	45		32.6	-9.6	One bank’s license was suspended in 1994. Bank recapitalization and restructuring are ongoing.
Slovak Republic	1998	35		0.0	0.0	In 1998, nonperforming loans reached 35% of total loans and a bank restructuring program was put in place involving the major state-owned banks.
Slovenia	1992		14.6	1.0	-5.5	Three banks—accounting for two-thirds of banking system assets—were restructured.
Spain	1977		5.6		0.2	In 1978–83, 24 institutions were rescued, 4 were liquidated, 4 were merged, and 20 small and medium-size banks were nationalized. These 52 banks (of 110), representing 20% of banking system deposits, were experiencing solvency problems.
Sri Lanka	1989	35	5	2.2	2.3	State-owned banks comprising 70% of banking system estimated to have nonperforming loans of about 35%. The government recapitalized two large state owned banks, Bank of Ceylon and the People’s Bank in 1993 (representing two-thirds of banking system assets) to solve their solvency problem due to high nonperforming assets.
Swaziland	1995			21.6	2.7	Meridien BIAO Swaziland was taken over by the Central Bank. The Central Bank also took over the Swaziland Development and Savings Bank, which faced severe portfolio problems.
Sweden	1991	13	3.6	30.6	-1.2	Nordbanken and Gota Bank, accounting for 22% of banking system assets, were insolvent. Sparbanken Foresta, accounting for 24% of banking system assets, intervened. Overall, 5 of the 6 largest banks, with more than 70% of banking system assets, experienced difficulties.
Tanzania	1987	70	10	0.0	3.8	In 1987 the main financial institutions had arrears amounting to half their portfolios. In 1995 it was determined that the National Bank of Commerce, which accounted for 95% of banking system assets, has been insolvent since at least 1990.
Thailand	1983		0.7	9.4	4.6	Authorities intervened in 50 finance and security firms and 5 commercial banks (25% of financial system assets); 3 commercial banks deemed insolvent (accounting for 14% of commercial bank assets). Fiscal cost for 50 finance companies estimated at 0.5% of GDP; fiscal cost for subsidized loans amounted to about 0.2% of GDP a year.
Thailand	1997	33	43.8	97.7	-10.5	Under the framework of a pegged exchange rate regime, Thailand had enjoyed a decade of robust growth performance, but by late 1996 pressures on the baht emerged. Pressure increased through the first half of 1997 amidst an unsustainable current account deficit, a significant appreciation of the real effective exchange rate, rising short-term foreign debt, a deteriorating fiscal balance, and increasingly visible financial sector weaknesses, including large exposure to the real estate sector, exchange rate risk and liquidity risk. Finance companies had disproportionately the largest exposure to the property sector and were the first institutions affected by the economic downturn. Following mounting exchange rate pressures and ineffective interventions to alleviate these pressures, the baht was floated on July 2, 1997. In light of weak supportive policies, the baht depreciated by 20 percent against the U.S. dollar in July. By May 2002, the Bank of Thailand had closed 59 (of 91) financial companies that in total accounted for 13% of financial system assets and 72% of finance company assets. It closed 1 (out of 15) domestic bank and nationalized 4 banks. A publicly owned asset management company held 29.7% of financial system assets as of March 2002. Nonperforming loans peaked at 33% of total loans and were reduced to 10.3% of total loans in February 2002.
Togo	1993			27.7	-16.3	Banking sector experienced solvency problems.
Tunisia	1991		3	0.0	2.2	In 1991 most commercial banks were undercapitalized. During 1991-94, the banking system raised equity equivalent to 1.5% of GDP and made provisions equivalent to another 1.5%.
Turkey	1982		2.5	0.0	3.4	Three banks were merged with the state-owned Agriculture Bank and then liquidated; two large banks were restructured.
Turkey	2000	27.6	32	5.4	-5.7	Banks had a high exposure to the government through large holdings of public securities, sizeable maturities and exchange rate risk mismatches, making them highly vulnerable to market risk. In Nov 2000, interbank credits to some banks holding long term government paper were cut, forcing them to liquidate the paper, which caused a sharp drop in the price of such securities, triggering a reversal in capital flows, a sharp increases in interest rates, and decline in the value of the currency. Two banks closed and 19 banks have been taken over by the Savings Deposit Insurance Fund.
Uganda	1994			0.0	5.5	Between 1994 and 1998, half of the banking system faced solvency problems. In 1998, two banks were closed and one recapitalized and privatized. In 1999, two banks were closed. In 2002, one small bank was intervened and two other banks were experiencing difficulties.
Ukraine	1998	62.4	0	0.0	-1.9	Between 1995 and 1997, 32 of 195 banks were liquidated, while 25 others were undergoing financial rehabilitation. Bad loans accounted for 50–65% of assets even in some leading banks. In 1998 banks were further hit by the government’s decision to restructure government debt following the Russian debt crisis.
United Kingdom	2007					On September 14, 2007, Northern Rock, a mid-sized UK mortgage lender, received a liquidity support facility from the Bank of England, following funding problems related to global turmoil in credit markets caused by the US subprime mortgage financial crisis. Starting on September 14, 2007, Northern Rock experienced a bank run, until a government blanket guarantee—covering only Northern Rock—was issued on September 17, 2007. On February 22, 2008, the bank was nationalized, following two unsuccessful bids to take it over. On April 21, 2008, the Bank of England announced it would accept a broad range of mortgage backed securities and swap those for government paper for a period of 1 year to aid banks in liquidity problems. The scheme enabled banks to temporarily swap high quality but illiquid mortgage backed assets and other securities with Treasury bills for a period of one year.
United States	1988	4.1	3.7	4.1	-0.2	More than 1,400 savings and loan institutions and 1,300 banks failed. Cleaning up savings and loan institutions cost $180 billion, or 3% of GDP.
United States	2007					During the course of 2007, US subprime mortgage markets melted down and global money markets were under pressure. The US subprime mortgage crisis manifested itself first through liquidity issues in the banking system owing to a sharp decline in demand for asset-backed securities. Hard-to-value structured products and other instruments created during a boom of financial innovation had to be severely marked down due to the newly implemented fair value accounting. Credit losses and asset writedowns got worse with accelerating mortgage foreclosures which increased in late 2006 and worsened further in 2007 and 2008. On August 16, 2007, Countrywide Financial ran into liquidity problems because of the decline in value of securitized mortgage obligations, triggering a deposit run on the bank. The Federal Reserve Bank “intervened” by lowering the discount rate by 0.5% and by accepting $17.2 billion in repurchase agreements for mortgage backed securities to aid in liquidity. On January 11, 2008, Bank of America bought Countrywide for US$4 billion. Bear Stearns, the fifth largest investment bank at the time, required an emergency government bailout and was purchased by JP Morgan Chase with federal guarantees on its liabilities in March 2008. Profits at U.S. banks declined from $35.2 to $5.8 billion (83.5%) during the fourth quarter of 2007 versus the prior year, due to provisions for loan losses. By June 2008, subprime-related and other credit losses or writedowns by global financial institutions hovered around $400 billion. The Fed introduced the Term Securities Lending facility to swap a broad range of mortgage backed securities for Treasury notes for a period of 1 month. On September 7, 2008, mortgage giants Fannie Mae and Freddie Mac were placed under conservatorship.
Uruguay	1981		31.2	87.5	-9.3	Affected institutions accounted for 30% of financial system assets; insolvent banks accounted for 20% of financial system deposits.
Uruguay	2002	36.3	20	28.8	-11.0	Introduction of capital controls and deposit freezes in Argentina in Dec. 2001 triggered liquidity problems at the two largest private banks Banco Galicia Uruguay (BGU) and Banco Comercial (BC) (with combined assets of 20% of the total) as a result of their high level of exposure to Argentina. In January 2002 alone, BGU lost 15% of deposits. BGU was intervened in February and later suspended. A second wave of deposit withdrawals ensued in April 2002, following Uruguay’s downgrade from investment grade status. By May, the runs expanded to the public banks (Republica and Hipotecario), accounting for 40% of the system’s assets, which were in a weak condition with NPL’s of 39% as of 2001 (compared to 6% at private banks).
Venezuela	1994	24	15	9.6	-2.3	Insolvent banks accounted for 35% of financial system deposits. In 1994 the authorities intervened in 17 of 47 banks that held 50% of deposits and nationalized 9 banks and closed 7 others. The government intervened in another 5 banks in 1995.
Vietnam	1997	35	10	19.7	4.8	Two of four large state-owned commercial banks—accounting for 51% of banking system loans—deemed insolvent; the other two experience significant solvency problems. Several joint stocks banks are in severe financial distress. Banking system nonperforming loans reached 18% in late 1998.
Yemen	1996			2.4	3.8	Banks suffered from extensive nonperforming loans and heavy foreign currency exposure, leaving many banks technically insolvent. The 1994 civil war drained Yemen’s economy leading up to financial crisis in 1996.
Zambia	1995		1.4	0.5	-2.8	Meridian Bank, accounting for 13% of commercial bank assets, became insolvent.
Zimbabwe	1995			2.4	0.1	Two of five commercial banks have high nonperforming loans.

View Table

Table 1.

Timing of Systemic Banking Crises

Country	Systemic banking crisis (starting date)	Share of NPLs at peak (%)	Gross fiscal cost (% of GDP)	Output loss (% of GDP)	Minimum real GDP growth rate (%)	Comments
Albania	1994	26.8			-7.2	Rapid growth in nonperforming loans, reaching 26.8% of total loans in 1994, following the creation of a two-tier commercial banking system in 1992.
Algeria	1990	30		6.7	-2.1	In 1989, five government-owned banks were granted managerial and financial autonomy from the central government. In the transition to a market economy, nonperforming loans (about 30% of total loans) created problems for some banks in 1990, and the Central bank had to provide discount financing to these banks.
Argentina	1980	9	55.1	10.8	-5.7	In March 1980 a number of financial institutions were forced to rely heavily on Central Bank financial assistance when faced with deposit withdrawals. Failed institutions included the largest investment bank and the second largest private commercial bank. More than 70 institutions (accounting for 16% of commercial bank assets and 35% of finance company assets) were liquidated or subjected to intervention between 1980 and 1982.
Argentina	1989	27	6	10.7	-7.0	During the 1980s, a decline in the availability of external resources led to an increased recourse to domestic financing. To fund its credit operations the Central Bank imposed reserve and investment requirements on deposits. They were replaced by frozen deposits at the Central Bank in August 1988. Central bank debt grew through the issuance of short-term paper (CEDEPS) to financial entities for purposes of monetary control. The Central Bank accelerated its placement of CEDEPS which by midyear were being issued to finance interest payments on the Central Bank’s own debt. By mid-1989 the quasi-fiscal deficit of the Central Bank reached almost 30% of GDP, although most of it was reversed by end-year. On January 1, 1990, the Government announced the bond conversion of time deposits and public sector debt coming due in 1990 (BONEX 89). The Central Bank kept liquidity tight and by end-February interest rates reached over 1000% a month for 7-day term deposits.
Argentina	1995	17	2	7.1	-2.8	After the Mexican devaluation, a small bond trader experienced a liquidity squeeze pushing it to closure by mid-January 1995. This development persuaded most banks to cut credit to bond traders, which in turn affected banks with large bond and open trading positions. Furthermore, provincial banks were having difficulties in raising funds and people started moving funds towards larger banks, in particularly foreign, perceived as more solvent, and by March 1995 capital flights intensified. Several measures were implemented at alleviating liquidity pressures. Eight banks were suspended and three banks collapsed. Out of the 205 banks in existence as of end of 1994, 63 exited the market through mergers, absorptions, or liquidation by end 1997.
Argentina	2001	20.1	9.6	42.7	-10.9	In March 2001, a bank run started due to increasing doubts about the sustainability of the currency board, strong opposition from the public to the new fiscal austerity package sent to the Congress, the resignation of president of the Central Bank, and the amendment to the convertibility law (change in parity from being pegged to the dollar, to being pegged to a basket composed of the US dollar and Euro). During the second half of 2001, bank runs intensified. On December 3, 2001, as several banks were at the verge of collapsing, partial withdrawal restrictions (corralito) were imposed to transactional accounts while fixed-term deposits (CDs) were reprogrammed (corralon) in order to stop outflows from banks. On February 4, 2002, bank assets were asymmetrically pesified adversely affecting the solvency of the banking system. In 2002, two voluntary swaps of deposits for government bonds were offered but received little interest by the public. In December 2002, the corralito was lifted. By August 2003, one bank has been closed, three banks nationalized, and many other have reduced their staff and branches.
Armenia	1994				3.3	Starting in August 1994, the Central Bank closed half of active banks. Large banks continued to suffer from high nonperforming loans. The savings bank was financially weak.
Azerbaijan	1995				-13.0	Twelve private banks closed; three large state-owned banks deemed insolvent; one large state-owned bank faced serious liquidity problems.
Bangladesh	1987	20		34.7	2.4	In 1987 four banks accounting for 70% of credit had nonperforming loans of 20%. From the late 1980s the entire private and public banking system was technically insolvent.
Belarus	1995				-11.3	Many banks undercapitalized; forced mergers burdened some banks with poor loan portfolios.
Benin	1988	80	17	1.9	-2.8	All three commercial banks collapsed.
Bolivia	1986	30		0.0	-2.6	Five banks were liquidated. Banking system nonperforming loans reached 30% in 1987; in mid-1988 reported arrears stood at 92% of commercial banks’ net worth.
Bolivia	1994	6.2	6	0.0	4.4	Two banks with 11% of banking system assets were closed in 1994. In 1995, 4 of 15 domestic banks, accounting for 30% of banking system assets, experienced liquidity problems and suffered high nonperforming loans.
Bosnia and Herzegovina	1992				-6.4	Banking system suffers from high nonperforming loans due to the breakup of the former Yugoslavia and the civil war.
Brazil	1990		0	12.2	-4.2	Deposits were converted to bonds. Liquidity assistance to public financial institutions.
Brazil	1994	16	13.2	0.0	2.1	The Brazilian economy entered a new phase with the implementation of the “Plan Real” in July 1994. The plan triggered a major process of structural changes, which aimed primarily at lowering inflation. With this process, a remonetization of the economy took place and with it, liabilities and assets of banks expanded rapidly—loans to private sector grew by 60% during the first year of the plan--despite higher reserve requirements. At the same time a sharp deterioration in the trade account took place, to which the central bank responded by raising interest rates and imposed credit restrictions. The financial situation of banks weakened as bad loans increased noticeably and also because they lost their inflation revenues. The problems were particularly more acute at public banks. For federal banks, the ratio of loans in arrears and in liquidation to total loans increased from 15.4 percent in June 1994 to 22.4 percent at end-1995, and to slightly more than 30 percent in October 1996. For state- owned banks the ratio increased from 8 percent to almost 12 percent and more than 14 percent for the same dates. For private banks, the ratio increased from 5 percent in June 1994 to 9 percent in December 1995. The problems in the banking sector triggered a restructuring of public banks and the resolution of private institutions. Most of the closures were medium to small-sized banks, while large banks were resolved under a “good bank/bad bank” approach.
Bulgaria	1996	75	14	1.3	-8.0	The 1996 banking crisis had its roots in bad loans made during 1991-1995, but the deepening insolvency of the system was not reflected in sustained liquidity problems until the second half of 1994. Two ailing state banks required ongoing refinancing from the Bulgarian National Bank (BNB) and the State Savings Bank (SSB) until they were bailed out in mid-1995. The public began to lose confidence in banks after the collapse of pyramid schemes in some cities, and in response to reports on the ill health of other banks. In late 1995 withdrawals of deposits, especially from First Private Bank (the largest private bank), were reflected in substantial BNB refinancing and falling foreign reserves. By early 1996 the sector had a negative net worth equal to 13% of GDP. The banking system experienced a run in early 1996. The government then stopped providing bailouts, prompting the closure of 19 banks accounting for one-third of sector assets. Surviving banks were recapitalized by 1997.
Burkina Faso	1990	16		45.2	-0.6	In 1989, the system of sectoral credit ratios was abolished, and deposit and lending rates were partially liberalized. During 1990, the financial condition of the banking sector deteriorated sharply. Nonperforming loans increased to 23 percent of total credit, and commercial banks’ deposits in the money market declined sharply. Three major commercial banks urgently needed restructuring, while two other large banks continued to experience liquidity problems. In 1991, the government merged these three major commercial banks into one bank with minority government participation and rehabilitated the two other banks, while assuming nonperforming assets.
Burundi	1994	25		66.3	-8.0	In 1995 one bank was liquidated.
Cameroon	1987	65		118.1	-7.9	Five commercial banks were closed and three banks were restructured.
Cameroon	1995	30		0.0	3.3	Three banks were restructured and two were closed.
Cape Verde	1993	30		0.0	6.7	In 1993, the former monobank was split into a Central Bank and a commercial bank, with 90 percent of banking system deposits. The commercial bank had accumulated a large fraction of nonperforming assets and was recapitalized by the government in 1994 by converting its portfolio of nonperforming loans into interest-bearing notes to the equivalent of 17.5 percent of GDP. All commercial banking interest rates were liberalized in 1994, with the exception of one benchmark interest rate on time deposits.
Central African Rep.	1976			0.0	2.5	Four banks were liquidated.
Central African Rep.	1995	40		1.1	-8.1	The two largest banks, accounting for 90% of assets, were restructured.
Chad	1983			0.0	5.3	All banking offices closed in 1979 and 1980 when N’Djamena was the scene of heavy fighting. Banking sector experienced solvency problems. With the collapse of world cotton prices in 1985, Cotontchad’s revenues dropped, and foreign exchange flowing into Chad declined. As a result, the BEAC’s exchange reserves dropped precipitously in 1986. Operations in the banking sector ground to a halt as Cotontchad fell into arrears on repayments of its shortterm debt. In late 1986, the BEAC negotiated a rescheduling of some three-fourths of the short-term debt, allowing a ten-year maturity, including a five-year grace period with an interest rate of 6%. In 1983 the government imposed a five-year moratorium that froze all deposits and outstanding credits before 1980. The moratorium’s purpose was to prevent a run on banks and to staunch capital flight when banks restored operations in early 1983 under the new government.
Chad	1992	35		37.2	-2.1	The Chadian banking system came close to collapse in 1992, owing mainly to the vulnerable state of the economy and an expansionary credit policy. To avoid a major financial crisis, the monetary authorities embarked on a comprehensive rehabilitation program of the banking system, involving enhancement of central bank supervision through the COBAC, and the liberalization of banking activity. In addition, they eased the liquidity crisis of the commercial banks in 1993 by consolidating into a long-term loan to the Government the rediscounted commercial bank loans that had been extended mainly to public enterprises. Credit policy was tightened; the amount of direct advances to the Treasury by the Central Bank was stabilized; and the Banque Internationale pour le Commerce et 1’Industrie du Tchad was liquidated. As a result, the net foreign assets position of the banking system was strengthened and the liquidity position of the banks was gradually restored.
Chile	1976			0.0	3.5	Entire mortgage system insolvent.
Chile	1981	35.6	42.9	92.4	-13.6	By the end of 1981, a 6-year expansionary period ended abruptly. High international interest rates, a world recession, lower copper prices, and an abrupt cut of voluntary foreign credit to Latin America pushed Chile into a costly economic crisis. The problems were agravated by unsound financial practices among banks, which included substantial connected lending ranging from 12 to 45% of the total loans portfolio. The financial system was affected in two waves. The first one in 1981-82 including 11 liquidations (banks and finance companies), where all depositors were protected. The second one in 1983, involved liquidations and rehabilitations and in the liquidation cases, domestic depositors were compensated only partially. While foreign creditors were offered the same compensation, they threatened by cutting trade credit lines and were ultimately restructured under the external debt restructuring plan.
China, P.R.	1998	20	18	36.8	7.6	At the end of 1998 China’s four large state-owned commercial banks, accounting for 68% of banking system assets, were deemed insolvent. Banking system NPL’s in 2002 and 2003 were 20 % and 15% respectively of total loans. The restructuring cost to date is around RMB1.8 trillion based on estimates of capital injections and loans to AMCs to purchase assets, or 18% of 2002 GDP.
Colombia	1982	4.1	5	15.1	0.9	During the early 1980s, an economic downturn affected the profitability of the banks. They came under pressure as the 1981 recession intensified. This, in turn, caused a sharp deterioration in asset quality through an increase in defaults. Colombia began experiencing capital outflows. Subsequent bank failures and nationalizations generated widespread decline in public confidence which led to a massive government intervention.The Central Bank intervened in six banks accounting for 25% of banking system assets, and in 8 finance companies.
Colombia	1998	14	6.3	33.5	-4.2	Capital account reversal during the first half of 1998 triggered by pressures in emerging markets led to a response from the Central Bank oriented towards defending the currency. As a result, interest rates increased in real terms, harming the quality of banks’ loan portfolios and putting a downward pressure on asset prices and hence on the value of collateral, especially real estate. The already weak large public banks faced a severe asset quality deterioration which spread to private banks and other financial entities.
Congo, Dem. Rep. of	1983			0.0	0.5	Banking sector experienced solvency problems.
Congo, Dem. Rep. of	1991			81.0	-13.5	Four state-owned banks were insolvent; a fifth bank was to be recapitalized with private participation.
Congo, Dem. Rep. of	1994	75		,	-5.4	Two state-owned banks have been liquidated and two other state banks privatized. In 1997, 12 banks were having serious financial difficulties.
Congo, Rep. of	1992			63.2	-5.5	Between 2001 and 2002, two large banks were restructured and privatized. The remaining insolvent bank is in the process of being liquidated. Situation aggravated by the civil war.
Costa Rica	1987			0.0	3.4	In 1987, public banks accounting for 90% of total banking system loans in financial distress as 32% of their loans considered uncollectible. Implied losses of at least twice the capital plus reserves. Pressure on banks to negotiate a “Brady” settlement of foreign debt; settlement reached 11/89 at 16 cents/dollar. Budgetary relief to government enables restructuring of state bank debts.
Costa Rica	1994	32		1.6	0.9	One large state-owned commercial bank with 17% of deposits 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. Implied losses of at least twice the capital plus reserves.
Côte d’Ivoire	1988	50	25	0.0	-1.1	The recession of 1987 and problems with the cocoa and coffee markets (main exports) substantially increased private sector’s non-performing loans. These problems were aggravated by a large amount of nonperforming loans in the public enterprise sectors, the large accumulation of government payment arrears, the substantial decline in public and private deposits in the banking system, reduction in credit lines from abroad, and poor management in some banks. Four large banks affected, accounting for 90% of banking system loans; three definitely and one possibly insolvent. Six government banks closed.
Croatia	1998	10.5	6.9	0.0	-0.9	The introduction of a market-oriented legal framework in the early 1990s, led to significant progress in establishing a modern banking system. The banking sector expanded vigorously until end-1997. Meanwhile, the incentives for sound bank behavior had not yet been fully established, coupled with bad debt problems inherited from the old regime. These weaknesses were in part addressed with the Bank rehabilitation plan (Law of 1994) implemented in 1996-1997. Four state-owned banks, accounting for 46 percent of total bank assets (as of 1995) entered rehabilitation, with an overall cost of 6.1% of GDP. However, a new wave of problems began in March 1998 with the failure of the 5th largest bank, Dubrovacka (5% of total assets). Problems at this bank triggered political turmoil, which in turn induced runs at other banks, perceived indirectly related to Dubrovacka. In july 1998, the sixth largest bank ran into problems and several medium- and small-sized institutions experienced liquidity difficulties in the fall of 1998 and early 1999 as well
Czech Republic	1996	18	6.8		-0.8	In 1994, a small bank failed (Banka Bohemia), due to fraud. While all depositors were covered, a partial deposit insurance coverage was introduced shortly after this first failure. The likelihood of facing material losses triggered runs at other small banks, until by the end of 1995, 2 small banks failed (Ceska and AB Banka), which triggered a second phase of bank restructuring starting in 1996, aimed at 18 small banks (9% of industry’s assets).
Djibouti	1991			22.6	-6.7	Two of six commercial banks ceased operations in 1991–92; other banks experienced difficulties.
Dominican Republic	2003	9	22	15.5	-1.9	In April 2003 Central bank took over Baninter (Banco Intercontinental) which declared bankruptcy in May and dissolved in July. Baninter’s liabilities exceeded its assets by 55 billion pesos ($2.2 billion) and 15% of GDP. The central bank had been providing liquidity support to Baninter since September 2002. Two other banks Bancredito and Banco Mercantil were also given liquidity support from the Central Bank to deal with deposit withdrawals.
Ecuador	1982			13.6	-2.8	Program exchanging domestic for foreign debt implemented to bail out banking system.
Ecuador	1998	40	21.7	6.5	-6.3	Seven financial institutions, accounting for 25–30% of commercial banking assets, were closed in 1998–99. In March 1999 bank deposits were frozen for 6 months. By January 2000, 16 financial institutions accounting for 65% of the assets had either been closed (12) or taken over (4) by the government. All deposits were unfrozen by March 2000. In 2002 the blanket guarantee was lifted.
Egypt	1980			38.1	2.2	The government closed several large investment companies.
El Salvador	1989	37		0.0	1.0	Nine state-owned commercial banks had nonperforming loans averaging 37%.
Equatorial Guinea	1983			0.0	-2.3	Two of the country’s largest banks were liquidated.
Eritrea	1993				2.3	Most of the banking system was insolvent.
Estonia	1992	7	1.9		-21.6	Banking problems surfaced in November 1992 when the state-owned North Estonian Bank (NEB), the Union Baltic Bank (UBB), and the Tartu Commercial Bank (TCB) exhibited serious liquidity problems and delayed payments by three weeks. A second episode of stress took place in early 1994, when the government reduced the level of its deposits from the Social Bank. The Social Bank, which controlled 10% of financial system assets, failed. Five banks’ licenses were revoked, and two major banks were merged and nationalized. Two other large banks were merged and converted to a loan recovery agency.
Finland	1991	13	12.8	59.1	-6.2	The three Nordic countries went through a financial liberalization process that led to a lending boom. However, they also suffered the adverse consequences of higher German interest rates. In the case of Finland, the problems were exacerbated by the collapse of exports to the Soviet Union. The first bank in trouble was Skopbank, which was taken over by the Central Bank in September 1991. Savings banks badly affected; government took control of three banks that together accounted for 31% of system deposits.
Georgia	1991	33			-44.9	Largest banks virtually insolvent.
Ghana	1982	35	6	15.8	-6.9	During most of the 80’s Ghana suffered severe structural imbalances related to the cumulative impact of large budgetary deficits, rapid increase in domestic bank credit, a fixed exchange rate, high inflation, which authorities aimed controlling through price controls. These policies were exacerbated by a deterioration of capital equipment and inadequate prices incentives in agricultural and export sectors. As a result, real output in 1981 was 15 percent lower than its 1974 level. The situation deteriorated further towards the second half of the 1980’s due to high fiscal deficits, financed primarily through domestic credit, directed credit policies (since 1981 banks were obliged to lend at least 20% of their portfolio to the agricultural sector), a deterioration in cocoa exports, and a large depreciation of the currenty (a 1173% depreciation took place in 1983). Banks experienced liquidity pressures, but in addition to that, there were defficiencies in banking supervision and regulation. As a result, 7 out of the 11 banks were insolvent and the problems were addressed by capitalization and purchase of NPL’s.
Guinea	1985		3	0.0	3.1	Six banks—accounting for 99% of system deposits—deemed insolvent. Repayment of deposits amounted to 3% of 1986 GDP.
Guinea	1993	45		0.0	4.0	Two banks deemed insolvent; one other bank had serious financial difficulties.
Guinea-Bissau	1995	45		22.8	-27.2	At end-1996, the Central Bank’s had a negative capital position and Guinea-Bissau’s two commercial banks had substantial nonperforming loans. In March-April 1997, the treasury recapitalized the Central Bank.
Guyana	1993			0.0	5.1	Prior to financial reforms starting in 1989, directed credit programs had resulted in investments with low rates of return and large nonperforming loans for the banks. State-owned banks were merged in May 1995 and a state-owned loan-recovery institution was subsequently established to recover the nonperforming loans of the merged bank.
Haiti	1994			9.3	-11.6	The Central Bank registered considerable losses as the majority of its assets, represented by credit to the government, were nonperforming.
Hungary	1991	23	10		-11.9	In the second half of 1993, 8 banks (25% of financial system assets) deemed insolvent.
India	1993	20		3.1	4.9	Nonperforming assets reached 11% in 1993–94. Nonperforming assets of the 27 public banks estimated at 20% in 1995. At the end of 1998 nonperforming loans estimated at 16% and at the end of 2001 they decreased to 12.4%.
Indonesia	1997	32.5	56.8	67.9	-13.1	Through May 2002, Bank Indonesia had closed 70 banks and nationalized 13, of a total of 237. Official nonperforming loans for the banking system were estimated at 32.5% of total loans at the peak of crisis.
Israel	1977		30	0.0	1.0	Almost the entire banking sector was affected, representing 60% of stock market capitalization. The stock exchange closed for 18 days, and bank share prices fell more than 40%.
Jamaica	1996	28.9	43.9	30.1	-1.2	In 1994 a merchant banking group (Blaise Group) was closed. In 1996, FINSAC, a government resolution agency, provided assistance to 5 banks, 5 life insurance companies, 2 building societies, and 9 merchant banks. Government recapitalized 21 troubled institutions via non-tradable government guaranteed bonds. By June 30, 2000 outstanding recap bonds estimated to account for 44% of GDP.
Japan	1997	35	14	17.6	-2.0	Banks suffered from sharp decline in stock market and real estate prices. In 1995 the official estimate of nonperforming loans was 40 trillion yen ($469 billion, or 10% of GDP). An unofficial estimate put nonperforming loans at $1 trillion, equivalent to 25% of GDP. Banks made provisions for some bad loans. At the end of 1998 banking system nonperforming loans were estimated at 88 trillion yen ($725 billion, or 18% of GDP). In 1999 Hakkaido Takushodu bank was closed, the Long Term Credit Bank was nationalized, Yatsuda Trust was merged with Fuji Bank, and Mitsui Trust was merged with Chuo Trust. In 2002 nonperforming loans were 35% of total loans; with a total of 7 banks nationalized, 61 financial institutions closed and 28 institutions merged. In 1996 rescue costs were estimated at more than $100 billion. In 1998 the government announced the Obuchi Plan, which provided 60 trillion yen ($500 billion, or 12% of GDP) in public funds for loan losses, bank recapitalizations, and depositor protection. By 2002 fiscal cost estimates rose to 24% of GDP.
Jordan	1989		10	66.6	-10.7	The third largest bank failed in August 1989. The central bank provided overdrafts equivalent to 10% of GDP to meet a run on deposits and allowed banks to settle foreign obligations.
Kenya	1985			0.0	4.1	Four banks and twenty-four nonbank financial institutions—accounting for 15% of financial system liabilities—faced liquidity and solvency problems.
Kenya	1992			23.0	-1.1	Intervention in two local banks.
Korea	1997	35	31.2	50.1	-6.9	The devaluation of the Thai baht in July 1997, the subsequent regional contagion, and the crash of the Hong Kong stock market sent shock waves to the Korean financial system. Korea’s exchange rate remained broadly stable through October 1997. However, the high level of short-term debt and the low level of usable international reserves made the economy increasingly vulnerable to shifts in market sentiment. While macroeconomic fundamentals continued to be favorable, the growing awareness of problems in the financial sector and in industrial groups (chaebols) increasingly led to the difficulties for the banks in rolling over their short-term borrowing. Through May 2002, 5 banks were forced to exit the market through “purchase and assumption” and 303 financial institutions shutdown (215 were credit unions); another 4 banks were nationalized.
Kuwait	1982	40		0.0	-9.5	Share dealings using postdated checks created a huge unregulated expansion of credit. The crash of the unofficial stock market finally came in 1982, when a dealer presented a postdated check for payment and it bounced. A house of cards collapsed. Official investigation revealed that total outstanding checks amounted to the equivalent of US$94 billion from about 6,000 investors. Kuwait’s financial sector was badly shaken by the crash, as was the entire economy. The crash prompted a recession that rippled through society as individual families were disrupted by the investment risks of particular members made on family credit. The debts from the crash left all but one bank in Kuwait technically insolvent, held up only by support from the Central Bank. Only the National Bank of Kuwait, the largest commercial bank, survived the crisis intact. In the end, the government stepped in, devising a complicated set of policies, embodied in the Difficult Credit Facilities Resettlement Program. The implementation of the program was still incomplete in 1990 when the Iraqi invasion changed the entire financial picture.
Kyrgyz Republic	1995	85			-5.8	In 1995, over half of the commercial banks had a negative net worth. The public lostv confidence in the banking system, and many people withdrew their funds, leading many of the banks to go out of business. License of five small banks were withdrawn in 1994-95. 2 banks were closed in 1999, following the Russian crisis.
Latvia	1995	20	3		-2.1	Between 1994 and 1999, 35 banks saw their license revoked, were closed, or ceased operations. In 1995 the negative net worth of the banking system was estimated at $320 million, or 7% of 1995 GDP. Aggregate banking system losses in 1998 estimated at 100 million lats ($172 million), about 3% of GDP.
Lebanon	1990			4.2	-13.4	Four small and medium-size banks became insolvent. Eleven had to resort to significant Central Bank lending. Bank of Lebanon claims on commercial banks reached LL 145 billion in September 1990 (equivalent to 31% of reserve money).
Liberia	1991				0.0	Seven of eleven banks not operational; in mid-1995 their assets accounted for 64% of bank assets.
Lithuania	1995	32.2	3.1		1.2	In 1995, of 25 banks, 12 small banks were liquidated, 3 private banks (accounting for 29% of banking system deposits) failed, and 3 state-owned banks were deemed insolvent.
Macedonia	1993	70	32		-7.5	The government took over banks’ foreign debt and closed the second largest bank. Costs of banking system rehabilitation, obligations from assumption of external debt, liabilities regarding frozen foreign exchange, and contingent liabilities in banks together estimated at 32% of GDP.
Madagascar	1988	25		0.0	-6.3	After the formal abandonment in 1985 of the previous policy of bank specialization and the appointment in 1986 of separate boards of directors to replace the single board that was share by all commercial banks, the rehabilitation of the banking system gained speed with the enactment in 1988 of a new banking law, which opened he system to private capital, and the decision in 1989 to write off most of the nonperforming loans of the existing banks.
Malaysia	1997	30	16.4	50.0	-7.4	The persistent pace of credit expansion at an annual rate of nearly 30 percent to the private sector, in particular to the property sector and for the purchase of stocks and hares, exposed the financial system to potential risks from price declines in property and other assets that occurred in 1997. In the wake of market turbulence and contagion effects in the second half of 1997, concerns among market participants about the true condition and resilience of the financial system increasingly became a central issue, highlighted by the known fragilities among finance companies. Finance company sector was restructured, and number of finance was reduced from 39 to 10 through mergers. Two finance companies were taken over by the Central Bank, including the largest independent finance company. Two banks deemed insolvent—accounting for 14% of financial system assets—will be merged with other banks. Nonperforming loans peaked between 25–35% of banking system assets and fell to 10.8% by March 2002.
Mali	1987	75		5.7	-0.3	Mali’s economic and financial prospects for 1986 and the medium term changed significantly due to the collapse in late 1985 of the world market price of cotton, Mali’s major export commodity. In 1987, although the Government undertook some corrective measures, the economic and financial situation deteriorated rapidly. The expansion of credit was significantly higher than programmed, and as a result, nonperforming loans at banks increased rapidly. Owing primarily to the overexposure of the largest commercial bank in terms of its loans and guaranteed letters of credit, a liquidity crunch emerged in the banking system. The financial situation of the largest commercial bank deteriorated further in 1987, reflecting the heavy losses of the public enterprise sector that it had financed over the years, defaults by the private sector on unsecured loans, and inappropriate management. By mid-November 1997, the bank had become virtually illiquid and ceased functioning normally. Its nonperforming loans amounted to some 70 percent of its outstanding credit.
Mauritania	1984	70	15	0.0	2.0	In 1984 five major banks had nonperforming assets ranging from 45–70% of their portfolios.
Mexico	1981			51.3	-3.5	Government took over troubled banking system.
Mexico	1994	18.9	19.3	4.2	-6.2	Of 34 commercial banks in 1994, 9 were intervened and 11 participated in the loan/purchase recapitalization program. The 9 intervened banks accounted for 19% of financial system assets and were deemed insolvent. By 2000, 50% of bank assets were held by foreign banks.
Morocco	1980			29.8	-2.8	Banking sector experienced solvency problems. Debt crisis 1980-83
Mozambique	1987			0.0	1.0	Main commercial bank experienced solvency problems that became apparent after 1992.
Nepal	1988	29		0.0	4.3	Nonperforming loans increased sharply during 1988-89 at the two largest commercial banks. Both banks are majority government-owned and together account for more than 90 percent of bank assets and deposits. In 1989, loan recovery programs were put in place for these two commercial banks.
Nicaragua	1990	50		0.0	-0.4	During the 1980’s, lending rates were subsidized and often set below deposit rates. Deposit rates were for the most part negative in real terms and contributed to a severe contraction of the banks’ deposit base. The Central Bank provided much of the funding for commercial banks, mainly by intermediating foreign loans and donations. Lack of bank supervision and prudential controls resulted in risky; ending and contributed to the large percentage of nonperforming loans in banks’ portfolios. In 1990, financial sector problems were acknowledged by a new government. In 1992, a financial reform package was announced to confront these problems. The state banking system was recapitalized and reorganized starting in 1992.
Nicaragua	2000	12.7	13.6	0.0	0.8	The largest bank in Nicaragua, Interbank, was found to have committed fraud and therefore was intervened in August 2000. Following the intervention, full protection for its depositors was announced. However, withdrawals continued until the bank was finally resolved in Oct. 2000 through a P&A. Another institution ran into problems soon after the resolution of Interbank. Runs against other banks occurred in part because the authorities announced limited coverage of its depositors. However, in its resolution a few days later, all depositors were protected. Two institutions more were resolved a few months later. All banks were resolved under P&A’s and a blanket guarantee was passed by law after the first two failures.
Niger	1983	50		,	-16.8	In the mid-1980s banking system nonperforming loans reached 50%. Four banks were liquidated and three restructured in the late 1980s. In 2002, a new round of bank restructuring was launched. Four banks were experiencing serious difficulties. Two of them were to be restructured and the other two might be liquidated.
Nigeria	1991	77		0.4	-0.6	In 1993 insolvent banks accounted for 20% of banking system assets and 22% of deposits. In 1995 almost half the banks reported being in financial distress.
Norway	1991	16.4	2.7	0.0	2.8	Financial deregulation undertaken during 1984-1987 led to a credit boom (with real rates of credit growth of 20% y-y), accompanied by a boom in both residential and non-residential real estate. In 1985 oil prices fell sharply, turning a 4.8 percent surplus in the current account into a 6.2% deficit in 1986 with ensuing pressures on the exchange rate. Meanwhile, rate increases by the Bundesbank following the reunification of Germany, forced Norway to keep interest rates high throughout the economic recession, which started in 1988. Problems at small banks that began in 1988 were addressed via mergers and assistance from the guarantee fund, funded by banks. However, by 1990 the fund had been depleted and the financial condition at large banks began to deteriorate. The turmoil reached systemic proportions by October 1991, when the second and fourth largest banks had lost a considerable amount of equity.
Panama	1988			37.8	-13.4	As a result of severe US-led economic sanctions, including the freezing of Panamanian assets in U.S. banks, a nine-week banking holiday was declared beginning in March 1988. As a result of these developments, the financial position of most state-owned and private commercial banks was substantially weakened and 15 banks ceased operations.
Paraguay	1995	8.1	12.9	0.0	0.4	During the early nineties, the banking system remained undercapitalized and non- performing loans rose sharply, coupled together with insider lending practices. Already in 1989, an assessment by the superintendency revealed that about one third of the banking system was insolvent. The crisis began in May 1995 when the third and fourth largest banks could not meet clearing obligations and were intervened. The first line of response was liquidity support. However, as the crisis unfolded, an important amount of unrecorded deposits were discovered. A blanket guarantee covering intervened banks was announced, but pressures remained because at first, the guarantee covered only legitimate deposits, although later, all deposits were protected. Through a series of interventions, closures and substantial liquidity support, the distress period lasted until 1999. In the end, between 1995-1999, 15 out of the 19 locally-owned banks were either closed or absorbed by stronger institutions. By 1999 banks were predominantly foreign owned.
Peru	1983			25.5	-9.3	Two large banks failed. The rest of the system suffered from high nonperforming loans and financial disintermediation following the nationalization of the banking system in 1987.
Philippines	1983	19	3	60.1	-7.3	Problems in two public banks accounting for 50% of banking system assets, six private banks accounting for 12% of banking system assets, 32 thrifts accounting for 53% of thrift banking assets, and 128 rural banks.
Philippines	1997	20	13.2	0.0	-0.6	Since January 1998 one commercial bank, 7 of 88 thrifts, and 40 of 750 rural banks have been placed under receivership. Banking system nonperforming loans reached 12% by November 1998, and were expected to reach 20% in 1999.
Poland	1992	24	3.5		2.0	In 1991 seven of nine treasury-owned commercial banks—accounting for 90% of credit—the Bank for Food Economy, and the cooperative banking sector experienced solvency problems.
Romania	1990	30	0.6		-12.9	In 1998 nonperforming loans reached 25–30% in the six main state-owned banks. The Agricultural Bank was recapitalized on a flow basis. In 1998 the Central Bank injected $210 million in Bancorex (0.6% of GDP), the largest state bank, and in 1999 another $60 million.
Russia	1998	40	6	0.0	-5.3	From mid-1997 to April 1998, the Central Bank of Russia (CBR) was relatively successful in defending the fixed exchange rate policy through a significant tightening of credit. However, the situation became increasingly untenable when significant political turmoil in Russia-starting with the President’s dismissal of the government of Prime Minister Chernomyrdin and prolonged by a stalemate over the formation of a new cabinet-cast increasing doubt on the political resolve to come to grips with Russia’s fiscal problems. From mid-July, when the Duma refused to pass key fiscal measures, the situation deteriorated rapidly, leading to a unilateral restructuring of ruble-denominated treasury bills and bonds on August 17, 1998. The ruble was allowed to float three days later despite previous announcements that it wouldn’t be devalued. A large devaluation in real effective terms (over 300% in nominal terms), loss of access to international capital markets, and massive losses to the banking system ensued. However, well before the crisis, there was widespread recognition that the banking system had a series of weaknesses. In particular, bank reporting and bank supervision were weak, there was an excessive exposure to foreign exchange rate risk, connected lending, and poor management. Two key measures implemented were a 90-day moratorium on foreign liabilities of banks and the transfer of a large fraction of deposits from insolvent banks to Sberbank. Nearly 720 banks, or half of those now operating, were deemed insolvent. These banks accounted for 4% of sector assets and 32% of retail deposits.
São Tomé and Principe	1992	90		0.0	0.7	At the end of 1992, 90% of the monobank’s loans were nonperforming. In 1993 the commercial and development departments of the former monobank were liquidated, as was the only financial institution. At the same time, two new banks were licensed that took over many of the assets of their predecessors. The credit operations of one new bank have been suspended since late 1994.
Senegal	1988	50	17	25.4	-0.7	In 1988, 50% of banking system loans were nonperforming. Six commercial banks and one development bank closed, accounting for 20–30% of financial system assets.
Sierra Leone	1990	45		32.6	-9.6	One bank’s license was suspended in 1994. Bank recapitalization and restructuring are ongoing.
Slovak Republic	1998	35		0.0	0.0	In 1998, nonperforming loans reached 35% of total loans and a bank restructuring program was put in place involving the major state-owned banks.
Slovenia	1992		14.6	1.0	-5.5	Three banks—accounting for two-thirds of banking system assets—were restructured.
Spain	1977		5.6		0.2	In 1978–83, 24 institutions were rescued, 4 were liquidated, 4 were merged, and 20 small and medium-size banks were nationalized. These 52 banks (of 110), representing 20% of banking system deposits, were experiencing solvency problems.
Sri Lanka	1989	35	5	2.2	2.3	State-owned banks comprising 70% of banking system estimated to have nonperforming loans of about 35%. The government recapitalized two large state owned banks, Bank of Ceylon and the People’s Bank in 1993 (representing two-thirds of banking system assets) to solve their solvency problem due to high nonperforming assets.
Swaziland	1995			21.6	2.7	Meridien BIAO Swaziland was taken over by the Central Bank. The Central Bank also took over the Swaziland Development and Savings Bank, which faced severe portfolio problems.
Sweden	1991	13	3.6	30.6	-1.2	Nordbanken and Gota Bank, accounting for 22% of banking system assets, were insolvent. Sparbanken Foresta, accounting for 24% of banking system assets, intervened. Overall, 5 of the 6 largest banks, with more than 70% of banking system assets, experienced difficulties.
Tanzania	1987	70	10	0.0	3.8	In 1987 the main financial institutions had arrears amounting to half their portfolios. In 1995 it was determined that the National Bank of Commerce, which accounted for 95% of banking system assets, has been insolvent since at least 1990.
Thailand	1983		0.7	9.4	4.6	Authorities intervened in 50 finance and security firms and 5 commercial banks (25% of financial system assets); 3 commercial banks deemed insolvent (accounting for 14% of commercial bank assets). Fiscal cost for 50 finance companies estimated at 0.5% of GDP; fiscal cost for subsidized loans amounted to about 0.2% of GDP a year.
Thailand	1997	33	43.8	97.7	-10.5	Under the framework of a pegged exchange rate regime, Thailand had enjoyed a decade of robust growth performance, but by late 1996 pressures on the baht emerged. Pressure increased through the first half of 1997 amidst an unsustainable current account deficit, a significant appreciation of the real effective exchange rate, rising short-term foreign debt, a deteriorating fiscal balance, and increasingly visible financial sector weaknesses, including large exposure to the real estate sector, exchange rate risk and liquidity risk. Finance companies had disproportionately the largest exposure to the property sector and were the first institutions affected by the economic downturn. Following mounting exchange rate pressures and ineffective interventions to alleviate these pressures, the baht was floated on July 2, 1997. In light of weak supportive policies, the baht depreciated by 20 percent against the U.S. dollar in July. By May 2002, the Bank of Thailand had closed 59 (of 91) financial companies that in total accounted for 13% of financial system assets and 72% of finance company assets. It closed 1 (out of 15) domestic bank and nationalized 4 banks. A publicly owned asset management company held 29.7% of financial system assets as of March 2002. Nonperforming loans peaked at 33% of total loans and were reduced to 10.3% of total loans in February 2002.
Togo	1993			27.7	-16.3	Banking sector experienced solvency problems.
Tunisia	1991		3	0.0	2.2	In 1991 most commercial banks were undercapitalized. During 1991-94, the banking system raised equity equivalent to 1.5% of GDP and made provisions equivalent to another 1.5%.
Turkey	1982		2.5	0.0	3.4	Three banks were merged with the state-owned Agriculture Bank and then liquidated; two large banks were restructured.
Turkey	2000	27.6	32	5.4	-5.7	Banks had a high exposure to the government through large holdings of public securities, sizeable maturities and exchange rate risk mismatches, making them highly vulnerable to market risk. In Nov 2000, interbank credits to some banks holding long term government paper were cut, forcing them to liquidate the paper, which caused a sharp drop in the price of such securities, triggering a reversal in capital flows, a sharp increases in interest rates, and decline in the value of the currency. Two banks closed and 19 banks have been taken over by the Savings Deposit Insurance Fund.
Uganda	1994			0.0	5.5	Between 1994 and 1998, half of the banking system faced solvency problems. In 1998, two banks were closed and one recapitalized and privatized. In 1999, two banks were closed. In 2002, one small bank was intervened and two other banks were experiencing difficulties.
Ukraine	1998	62.4	0	0.0	-1.9	Between 1995 and 1997, 32 of 195 banks were liquidated, while 25 others were undergoing financial rehabilitation. Bad loans accounted for 50–65% of assets even in some leading banks. In 1998 banks were further hit by the government’s decision to restructure government debt following the Russian debt crisis.
United Kingdom	2007					On September 14, 2007, Northern Rock, a mid-sized UK mortgage lender, received a liquidity support facility from the Bank of England, following funding problems related to global turmoil in credit markets caused by the US subprime mortgage financial crisis. Starting on September 14, 2007, Northern Rock experienced a bank run, until a government blanket guarantee—covering only Northern Rock—was issued on September 17, 2007. On February 22, 2008, the bank was nationalized, following two unsuccessful bids to take it over. On April 21, 2008, the Bank of England announced it would accept a broad range of mortgage backed securities and swap those for government paper for a period of 1 year to aid banks in liquidity problems. The scheme enabled banks to temporarily swap high quality but illiquid mortgage backed assets and other securities with Treasury bills for a period of one year.
United States	1988	4.1	3.7	4.1	-0.2	More than 1,400 savings and loan institutions and 1,300 banks failed. Cleaning up savings and loan institutions cost $180 billion, or 3% of GDP.
United States	2007					During the course of 2007, US subprime mortgage markets melted down and global money markets were under pressure. The US subprime mortgage crisis manifested itself first through liquidity issues in the banking system owing to a sharp decline in demand for asset-backed securities. Hard-to-value structured products and other instruments created during a boom of financial innovation had to be severely marked down due to the newly implemented fair value accounting. Credit losses and asset writedowns got worse with accelerating mortgage foreclosures which increased in late 2006 and worsened further in 2007 and 2008. On August 16, 2007, Countrywide Financial ran into liquidity problems because of the decline in value of securitized mortgage obligations, triggering a deposit run on the bank. The Federal Reserve Bank “intervened” by lowering the discount rate by 0.5% and by accepting $17.2 billion in repurchase agreements for mortgage backed securities to aid in liquidity. On January 11, 2008, Bank of America bought Countrywide for US$4 billion. Bear Stearns, the fifth largest investment bank at the time, required an emergency government bailout and was purchased by JP Morgan Chase with federal guarantees on its liabilities in March 2008. Profits at U.S. banks declined from $35.2 to $5.8 billion (83.5%) during the fourth quarter of 2007 versus the prior year, due to provisions for loan losses. By June 2008, subprime-related and other credit losses or writedowns by global financial institutions hovered around $400 billion. The Fed introduced the Term Securities Lending facility to swap a broad range of mortgage backed securities for Treasury notes for a period of 1 month. On September 7, 2008, mortgage giants Fannie Mae and Freddie Mac were placed under conservatorship.
Uruguay	1981		31.2	87.5	-9.3	Affected institutions accounted for 30% of financial system assets; insolvent banks accounted for 20% of financial system deposits.
Uruguay	2002	36.3	20	28.8	-11.0	Introduction of capital controls and deposit freezes in Argentina in Dec. 2001 triggered liquidity problems at the two largest private banks Banco Galicia Uruguay (BGU) and Banco Comercial (BC) (with combined assets of 20% of the total) as a result of their high level of exposure to Argentina. In January 2002 alone, BGU lost 15% of deposits. BGU was intervened in February and later suspended. A second wave of deposit withdrawals ensued in April 2002, following Uruguay’s downgrade from investment grade status. By May, the runs expanded to the public banks (Republica and Hipotecario), accounting for 40% of the system’s assets, which were in a weak condition with NPL’s of 39% as of 2001 (compared to 6% at private banks).
Venezuela	1994	24	15	9.6	-2.3	Insolvent banks accounted for 35% of financial system deposits. In 1994 the authorities intervened in 17 of 47 banks that held 50% of deposits and nationalized 9 banks and closed 7 others. The government intervened in another 5 banks in 1995.
Vietnam	1997	35	10	19.7	4.8	Two of four large state-owned commercial banks—accounting for 51% of banking system loans—deemed insolvent; the other two experience significant solvency problems. Several joint stocks banks are in severe financial distress. Banking system nonperforming loans reached 18% in late 1998.
Yemen	1996			2.4	3.8	Banks suffered from extensive nonperforming loans and heavy foreign currency exposure, leaving many banks technically insolvent. The 1994 civil war drained Yemen’s economy leading up to financial crisis in 1996.
Zambia	1995		1.4	0.5	-2.8	Meridian Bank, accounting for 13% of commercial bank assets, became insolvent.
Zimbabwe	1995			2.4	0.1	Two of five commercial banks have high nonperforming loans.

B. Currency Crises

Building on the approach in Frankel and Rose (1996), we define a “currency crisis” as a nominal depreciation of the currency of at least 30 percent that is also at least a 10 percent increase in the rate of depreciation compared to the year before. In terms of measurement of the exchange rate depreciation, we use 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 criteria for several continuous years, we use the first year of each 5-year window to identify the crisis. This definition yields 208 currency crises during the period 1970-2007. It should be noted that this list also includes large devaluations by countries that adopt fixed exchange rate regimes.

C. Sovereign Debt Crises

We identify and date episodes of sovereign debt default and restructuring by relying on information from Beim and Calomiris (2001), World Bank (2002), Sturzenegger and Zettelmeyer (2006), and IMF Staff reports. The information compiled include year of sovereign defaults to private lending and year of debt rescheduling.Using this approach, we identify 63 episodes of sovereign debt defaults and restructurings since 1970.

Table 2 list the complete list of starting years of systemic banking crises, currency crises, and sovereign debt crises.

Table 2.

Timing of Financial Crises

Table 2.

Timing of Financial Crises

Country	Systemic Banking Crisis (starting date)	Currency Crisis (year)	Debt Crisis (default date)	Debt Restructuring (year)
Albania	1994	1997	1990	1992
Algeria	1990	1988, 1994
Angola		1991, 1996	1988	1992
Argentina	1980, 1989, 1995, 2001	1975, 1981, 1987, 2002	1982, 2001	1993, 2005
Armenia	1994	1994
Australia
Austria
Azerbaijan	1995	1994
Bangladesh	1987	1976
Barbados
Belarus	1995	1994, 1999
Belgium
Belize
Benin	1988	1994
Bhutan
Bolivia	1986, 1994	1973, 1981	1980	1992
Bosnia and Herzegovina	1992
Botswana		1984
Brazil	1990, 1994	1976, 1982, 1987, 1992, 1999	1983	1994
Brunei
Bulgaria	1996	1996	1990	1994
Burkina Faso	1990	1994
Burundi	1994
Cambodia		1971, 1992
Cameroon	1987, 1995	1994	1989	1992
Canada
Cape Verde	1993
Central African Rep.	1976, 1995	1994
Chad	1983, 1992	1994
Chile	1976, 1981	1972, 1982	1983	1990
China, P.R.	1998
Colombia	1982, 1998	1985
Comoros		1994
		1976, 1983, 1989, 1994,
Congo, Dem. Rep. of
	1983, 1991, 1994	1999	1976	1989
Congo, Rep. of	1992	1994	1986	1992
Costa Rica	1987, 1994	1981, 1991	1981	1990
Côte d’Ivoire	1988	1994	1984, 2001	1997, n.a.
Croatia	1998
Czech Republic	1996
Denmark
Djibouti	1991
Dominica			2002	n.a.
Dominican Republic	2003	1985, 1990, 2003	1982, 2003	1994, 2005
Ecuador	1982, 1998	1982, 1999	1982, 1999	1995, 2000
Egypt	1980	1979, 1990	1984	1992
El Salvador	1989	1986
Equatorial Guinea	1983	1980, 1994
Eritrea	1993
Estonia	1992	1992
Ethiopia		1993
Fiji		1998
Finland	1991	1993
France
Gabon		1994	1986, 2002	1994
Gambia, The		1985, 2003	1986	1988
Georgia	1991	1992, 1999
Germany
Ghana	1982	1978, 1983, 1993, 2000
Greece		1983
Grenada			2004	2005
Guatemala		1986
Guinea	1985, 1993	1982, 2005	1985	1992
Guinea-Bissau	1995	1980, 1994
Guyana	1993	1987	1982	1992
Haiti	1994	1992, 2003
Honduras		1990	1981	1992
China, P.R.: Hong Kong
Hungary	1991
Iceland		1975, 1981, 1989
India	1993
Indonesia	1997	1979, 1998	1999	2002
Iran, I.R. of		1985, 1993, 2000	1992	1994
Ireland
Israel	1977	1975, 1980, 1985
Italy		1981
Jamaica	1996	1978, 1983, 1991	1978	1990
Japan	1997
Jordan	1989	1989	1989	1993
Kazakhstan		1999
Kenya	1985, 1992	1993
Korea	1997	1998
Kuwait	1982
Kyrgyz Republic	1995	1997
Lao People’s Dem. Rep.		1972, 1978, 1986, 1997
Latvia	1995	1992
Lebanon	1990	1984, 1990
Lesotho		1985
Liberia	1991		1980	n.a.
Libya		2002
Lithuania	1995	1992
Luxemburg
Macedonia	1993
Madagascar	1988	1984, 1994, 2004	1981	1992
Malawi		1994	1982	1988
Malaysia	1997	1998
Maldives		1975
Mali	1987	1994
Mauritania	1984	1993
Mauritius
Mexico	1981, 1994	1977, 1982, 1995	1982	1990
Moldova		1999	2002	2002
Mongolia		1990, 1997
Morocco	1980	1981	1983	1990
Mozambique	1987	1987	1984	1991
		1975, 1990, 1996, 2001,
Myanmar
		2007
Namibia		1984
Nepal	1988	1984, 1992
Netherlands
New Caledonia		1981
New Zealand		1975, 1984
Nicaragua	1990, 2000	1979, 1985, 1990	1980	1995
Niger	1983	1994	1983	1991
Nigeria	1991	1983, 1989, 1997	1983	1992
Norway	1991
Pakistan		1972
Panama	1988		1983	1996
Papua New Guinea		1995
Paraguay	1995	1984, 1989, 2002	1982	1992
Peru	1983	1976, 1981, 1988	1978	1996
Philippines	1983, 1997	1983, 1998	1983	1992
Poland	1992		1981	1994
Portugal		1983
Romania	1990	1996	1982	1987
Russia	1998	1998	1998	2000
Rwanda		1991
São Tomé and Principe	1992	1987, 1992, 1997
Senegal	1988	1994	1981	1996
Serbia, Republic of		2000
Sierra Leone	1990	1983, 1989, 1998	1977	1995
Singapore
Slovak Republic	1998
Slovenia	1992
South Africa		1984	1985	1993
Spain	1977	1983
Sri Lanka	1989	1978
Sudan		1981, 1988, 1994	1979	1985
Suriname		1990, 1995, 2001
Swaziland	1995	1985
Sweden	1991	1993
Syrian Arab Republic		1988
Switzerland
Tajikistan		1999
Tanzania	1987	1985, 1990	1984	1992
Thailand	1983, 1997	1998
Togo	1993	1994	1979	1997
Trinidad and Tobago		1986	1989	1989
Tunisia	1991
		1978, 1984, 1991, 1996,
Turkey
	1982, 2000	2001	1978	1982
Turkmenistan		1993
Uganda	1994	1980, 1988	1981	1993
Ukraine	1998	1998	1998	1999
United Kingdom	2007
United States	1988, 2007
Uruguay	1981, 2002	1972, 1983, 1990, 2002	1983, 2002	1991, 2003
Uzbekistan		1994, 2000
Venezuela	1994	1984, 1989, 1994, 2002	1982	1990
Vietnam	1997	1972, 1981, 1987	1985	1997
Yemen	1996	1985, 1995
Yugoslavia, SFR			1983	1988
Zambia	1995	1983, 1989, 1996	1983	1994
Zimbabwe	1995	1983, 1991, 1998, 2003

View Table

Table 2.

Timing of Financial Crises

Country	Systemic Banking Crisis (starting date)	Currency Crisis (year)	Debt Crisis (default date)	Debt Restructuring (year)
Albania	1994	1997	1990	1992
Algeria	1990	1988, 1994
Angola		1991, 1996	1988	1992
Argentina	1980, 1989, 1995, 2001	1975, 1981, 1987, 2002	1982, 2001	1993, 2005
Armenia	1994	1994
Australia
Austria
Azerbaijan	1995	1994
Bangladesh	1987	1976
Barbados
Belarus	1995	1994, 1999
Belgium
Belize
Benin	1988	1994
Bhutan
Bolivia	1986, 1994	1973, 1981	1980	1992
Bosnia and Herzegovina	1992
Botswana		1984
Brazil	1990, 1994	1976, 1982, 1987, 1992, 1999	1983	1994
Brunei
Bulgaria	1996	1996	1990	1994
Burkina Faso	1990	1994
Burundi	1994
Cambodia		1971, 1992
Cameroon	1987, 1995	1994	1989	1992
Canada
Cape Verde	1993
Central African Rep.	1976, 1995	1994
Chad	1983, 1992	1994
Chile	1976, 1981	1972, 1982	1983	1990
China, P.R.	1998
Colombia	1982, 1998	1985
Comoros		1994
		1976, 1983, 1989, 1994,
Congo, Dem. Rep. of
	1983, 1991, 1994	1999	1976	1989
Congo, Rep. of	1992	1994	1986	1992
Costa Rica	1987, 1994	1981, 1991	1981	1990
Côte d’Ivoire	1988	1994	1984, 2001	1997, n.a.
Croatia	1998
Czech Republic	1996
Denmark
Djibouti	1991
Dominica			2002	n.a.
Dominican Republic	2003	1985, 1990, 2003	1982, 2003	1994, 2005
Ecuador	1982, 1998	1982, 1999	1982, 1999	1995, 2000
Egypt	1980	1979, 1990	1984	1992
El Salvador	1989	1986
Equatorial Guinea	1983	1980, 1994
Eritrea	1993
Estonia	1992	1992
Ethiopia		1993
Fiji		1998
Finland	1991	1993
France
Gabon		1994	1986, 2002	1994
Gambia, The		1985, 2003	1986	1988
Georgia	1991	1992, 1999
Germany
Ghana	1982	1978, 1983, 1993, 2000
Greece		1983
Grenada			2004	2005
Guatemala		1986
Guinea	1985, 1993	1982, 2005	1985	1992
Guinea-Bissau	1995	1980, 1994
Guyana	1993	1987	1982	1992
Haiti	1994	1992, 2003
Honduras		1990	1981	1992
China, P.R.: Hong Kong
Hungary	1991
Iceland		1975, 1981, 1989
India	1993
Indonesia	1997	1979, 1998	1999	2002
Iran, I.R. of		1985, 1993, 2000	1992	1994
Ireland
Israel	1977	1975, 1980, 1985
Italy		1981
Jamaica	1996	1978, 1983, 1991	1978	1990
Japan	1997
Jordan	1989	1989	1989	1993
Kazakhstan		1999
Kenya	1985, 1992	1993
Korea	1997	1998
Kuwait	1982
Kyrgyz Republic	1995	1997
Lao People’s Dem. Rep.		1972, 1978, 1986, 1997
Latvia	1995	1992
Lebanon	1990	1984, 1990
Lesotho		1985
Liberia	1991		1980	n.a.
Libya		2002
Lithuania	1995	1992
Luxemburg
Macedonia	1993
Madagascar	1988	1984, 1994, 2004	1981	1992
Malawi		1994	1982	1988
Malaysia	1997	1998
Maldives		1975
Mali	1987	1994
Mauritania	1984	1993
Mauritius
Mexico	1981, 1994	1977, 1982, 1995	1982	1990
Moldova		1999	2002	2002
Mongolia		1990, 1997
Morocco	1980	1981	1983	1990
Mozambique	1987	1987	1984	1991
		1975, 1990, 1996, 2001,
Myanmar
		2007
Namibia		1984
Nepal	1988	1984, 1992
Netherlands
New Caledonia		1981
New Zealand		1975, 1984
Nicaragua	1990, 2000	1979, 1985, 1990	1980	1995
Niger	1983	1994	1983	1991
Nigeria	1991	1983, 1989, 1997	1983	1992
Norway	1991
Pakistan		1972
Panama	1988		1983	1996
Papua New Guinea		1995
Paraguay	1995	1984, 1989, 2002	1982	1992
Peru	1983	1976, 1981, 1988	1978	1996
Philippines	1983, 1997	1983, 1998	1983	1992
Poland	1992		1981	1994
Portugal		1983
Romania	1990	1996	1982	1987
Russia	1998	1998	1998	2000
Rwanda		1991
São Tomé and Principe	1992	1987, 1992, 1997
Senegal	1988	1994	1981	1996
Serbia, Republic of		2000
Sierra Leone	1990	1983, 1989, 1998	1977	1995
Singapore
Slovak Republic	1998
Slovenia	1992
South Africa		1984	1985	1993
Spain	1977	1983
Sri Lanka	1989	1978
Sudan		1981, 1988, 1994	1979	1985
Suriname		1990, 1995, 2001
Swaziland	1995	1985
Sweden	1991	1993
Syrian Arab Republic		1988
Switzerland
Tajikistan		1999
Tanzania	1987	1985, 1990	1984	1992
Thailand	1983, 1997	1998
Togo	1993	1994	1979	1997
Trinidad and Tobago		1986	1989	1989
Tunisia	1991
		1978, 1984, 1991, 1996,
Turkey
	1982, 2000	2001	1978	1982
Turkmenistan		1993
Uganda	1994	1980, 1988	1981	1993
Ukraine	1998	1998	1998	1999
United Kingdom	2007
United States	1988, 2007
Uruguay	1981, 2002	1972, 1983, 1990, 2002	1983, 2002	1991, 2003
Uzbekistan		1994, 2000
Venezuela	1994	1984, 1989, 1994, 2002	1982	1990
Vietnam	1997	1972, 1981, 1987	1985	1997
Yemen	1996	1985, 1995
Yugoslavia, SFR			1983	1988
Zambia	1995	1983, 1989, 1996	1983	1994
Zimbabwe	1995	1983, 1991, 1998, 2003

D. Frequency of Crises and Occurrence of Twin Crises

Table 3 reports the frequency of different types of crises (banking, currency, and sovereign debt), as well as the occurrence of twin (banking and currency) crises or triple (banking, currency, and debt) crises. We define a twin crisis in year t as a banking crisis in year t, combined with a currency 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].

Table 3.

Frequency of Financial Crises ^1/

^1/Twin crisis indicates banking crisis in year t and currency crisis during [t-1, t+1]. Triple crisis indicates banking crisis in year t and currency crisis during [t-1, t+1] and debt crisis during [t-1, t+1]).

Table 3.

Frequency of Financial Crises ^1/

Year	Banking crisis (number)	Currency crisis (number)	Sovereign debt crisis (number)	Twin crisis (number)	Triple crisis (number)
1970		3
1971		4
1972		6
1973		1
1974		3
1975		12
1976	2	6	1
1977	2	3	1
1978		7	3
1979		6	2
1980	3	2	3	3
1981	3	45	6	2	1
1982	5	11	9	2	1
1983	7	14	10	2	1
1984	1	9	4
1985	2	9	3
1986	1	8	3
1987	6	13		,
1988	7	8	1
1989	4	8	3	1	1
1990	7	10	2	3
1991	10	14		1
1992	8	15	1	3
1993	7	3		1
1994	11	23		4
1995	13	8		5
1996	4	15		2
1997	7	15		5
1998	7	6	2	3	3
1999		11	2
2000	2	7		1
2001	1	5	2	1	1
2002	1	7	4	1	1
2003	1	3	1	1	1
2004		2	1
2005			2
2006		1
2007	2	1
Total	124	208	63	42	10

^1/Twin crisis indicates banking crisis in year t and currency crisis during [t-1, t+1]. Triple crisis indicates banking crisis in year t and currency crisis during [t-1, t+1] and debt crisis during [t-1, t+1]).

View Table

Table 3.

Frequency of Financial Crises ^1/

Year	Banking crisis (number)	Currency crisis (number)	Sovereign debt crisis (number)	Twin crisis (number)	Triple crisis (number)
1970		3
1971		4
1972		6
1973		1
1974		3
1975		12
1976	2	6	1
1977	2	3	1
1978		7	3
1979		6	2
1980	3	2	3	3
1981	3	45	6	2	1
1982	5	11	9	2	1
1983	7	14	10	2	1
1984	1	9	4
1985	2	9	3
1986	1	8	3
1987	6	13		,
1988	7	8	1
1989	4	8	3	1	1
1990	7	10	2	3
1991	10	14		1
1992	8	15	1	3
1993	7	3		1
1994	11	23		4
1995	13	8		5
1996	4	15		2
1997	7	15		5
1998	7	6	2	3	3
1999		11	2
2000	2	7		1
2001	1	5	2	1	1
2002	1	7	4	1	1
2003	1	3	1	1	1
2004		2	1
2005			2
2006		1
2007	2	1
Total	124	208	63	42	10

^1/Twin crisis indicates banking crisis in year t and currency crisis during [t-1, t+1]. Triple crisis indicates banking crisis in year t and currency crisis during [t-1, t+1] and debt crisis during [t-1, t+1]).

We find that banking crises were most frequent during the early 1990’s, with a maximum of 13 systemic banking crises starting in the year 1995. Currency crises were also common during the first-half of the 1990’s but the early 1980’s also represented a high mark for currency crises, with a peak in 1981 of 45 episodes. Sovereign debt crises were also relatively common during the early 1980’s, with a peak of 10 debt crises in 1983. In total, we count 124 banking crises, 208 currency crises, and 63 sovereign debt crises over the period 1970 to 2007. Note that several countries experienced multiple crises. Of these 124 banking crises, 42 are considered twin crises and 10 can be classified as triple crises, using our definition.

A. Overview and Initial Conditions

We start with information on initial conditions of the crisis, including whether or not banking distress coincided with exchange rate pressures and sovereign debt repayment problems, initial macroeconomic conditions, the state of the banking system, and institutional development of the country.

• CRISIS DATE is the starting date of the banking crisis, including year and month, when available. The timing of the banking crisis follows the approach described in section II.

• CURRENCY CRISIS indicates whether or not a currency crisis occurred during the period [t-1, t+1], where t denotes the starting year of the banking crisis. The timing of a currency crisis follows the approach described in section II, except that we do not impose the restriction that we only keep the first year of each 5-year window for observations that meet the criteria for several continuous years. For example, if the currency experiences a nominal depreciation of at least 30 percent that is also at least a 10 percent increase in the rate of depreciation in both years t-2 and t-1, with t the starting year of the banking crisis, we treat year t-1 as the year of the currency crisis for the purposes of creating this variable. We also list the year of the currency crisis, denoted as YEAR OF CURRENCY CRISIS.

• SOVEREIGN DEBT CRISIS indicates whether or not a sovereign debt crisis occurred during the period [t-1, t+1], where t denotes the starting year of the banking crisis. The timing of a sovereign debt crisis follows the approach described in section II. We also list the year of the sovereign debt crisis, denoted as YEAR OF SOVEREIGN DEBT CRISIS.

• This is followed by a brief description of the crisis, denoted as BRIEF DESCRIPTION OF CRISIS.

In terms of initial macroeconomic conditions, we have collected information on the following variables. Each of these variables are computed at time t-1, where t denotes the starting year of the banking crisis, using data from the IMF’s IFS and World Economic Outlook (WEO).

• FISCAL BALANCE/GDP is the ratio of the General Government balance to GDP for the pre-crisis year t-1, where t denotes the starting year of the banking crisis.⁹

• PUBLIC DEBT/GDP is the ratio of the General Government gross debt to GDP for the pre-crisis year t-1, where t denotes the starting year of the banking crisis.

• INFLATION is the percentage increase in the CPI index during the pre-crisis year t-1, where t denotes the starting year of the banking crisis.

• NET FOREIGN ASSETS (CENTRAL BANK) is the net foreign assets of the Central Bank in millions of US dollars for the pre-crisis year t-1, where t denotes the starting year of the banking crisis.

• NET FOREIGN ASSETS/M2 is the ratio of net foreign assets (Central Bank) to M2 for the pre-crisis year t-1, where t denotes the starting year of the banking crisis.

• DEPOSITS/GDP is the ratio of total deposits at deposit taking institutions to GDP for the pre-crisis year t-1, where t denotes the starting year of the banking crisis.

• GDP GROWTH is real growth in GDP during the pre-crisis year t-1, where t denotes the starting year of the banking crisis.

• CURRENT ACCOUNT/GDP is the ratio of current account to GDP for the pre-crisis year t-1, where t denotes the starting year of the banking crisis.

We have collected the following information on the state of the banking system.

• PEAK NPL is the peak ratio of nonperforming loans to total loans (in percent) during the years [t, t+5], where t is the starting year of the crisis. This is an estimate using data from Honohan and Laeven (2003) and IMF staff reports. In all cases, we use the country’s definition of nonperforming loans.

• GOVERNMENT OWNED is the share of banking system assets that is government-owned (in percent) in year t-1, where t denoted the starting year of the banking crisis. Data are from La Porta et al. (2002) and refer to the year 1980 or 1995, whichever is closer to the starting date of the crisis, t. When more recent data is available from IMF staff reports, such data is used instead.

• SIGNIFICANT BANK RUNS indicates whether or not the country’s banking system experiences a depositors’ run, defined as a one-month percentage drop in total outstanding deposits in excess of 5 percent during the period [t, t+1], where t denotes the starting year of the banking crisis. This variable is constructed using data from IFS.

• CREDIT BOOM indicates whether or not the country has experienced a credit boom leading up to the crisis, defined as three-year pre-crisis average growth in private credit to GDP in excess of 10 percent per annum, computed over the period (t-4, t-1], where t denotes the starting year of the banking crisis. This variable is constructed using data from IFS.

As proxy for institutional development, we collect data on the degree of protection of credit rights in the country.

• CREDITOR RIGHTS is an index of protection of creditors’ rights from Djankov et al. (2007). The index ranges from 0 to 4 and higher scores denotes better protection of creditor rights. We use the score in the year t, where t denotes the starting year of the banking crisis.

B. Crisis Containment Policies

Initially, the government’s policy options are limited to those policies that do not rely on the formation of new institutions or complex new mechanisms. Immediate policy responses include (a) suspension of convertibility of deposits, which prevents bank depositors from seeking repayment from banks, (b) regulatory capital forbearance¹⁰, which allows banks to avoid the cost of regulatory compliance (for example by allowing banks to overstate their equity capital in order to avoid the costs of contractions in loan supply), (c) emergency liquidity support to banks, or (d) a government guarantee of depositors. Each of these immediate policy actions are motivated by adverse changes in the condition of banks.

Banks suffering severe losses tend not only to see rising costs but also to experience liability rationing, either because they must contract deposits to satisfy their regulatory equity capital requirement, or because depositors at risk of loss prefer to place funds in more stable intermediaries. Banks, in turn, will transmit those difficulties to their borrowers in the form of a contraction of credit supply (Valencia 2008). Credit will become more costly and financial distress of borrowers and banks more likely.

The appropriate policy response will depend on whether the trigger for the crisis is a loss of depositor confidence (triggering a deposit run), regulatory recognition of bank insolvency, or the knock-on effects of financial asset market disturbances outside the banking system, including exchange rate and wider macroeconomic pressures.

Deposit withdrawals can be addressed by emergency liquidity loans, usually from the central bank when market sources are insufficient, by an extension of government guarantees of depositors and other bank creditors, or by a temporary suspension of depositor rights in what is often called a “bank holiday”. Each of these techniques is designed to buy time, and in the case of the first two, that depositor confidence can soon be restored. The success of each technique will crucially depend on the credibility and creditworthiness of the government.

Preventing looting of an insolvent or near insolvent bank requires a different set of containment tools, which may include administrative intervention including the temporary assumption of management powers by a regulatory official, or closure, which may for example include the subsidized compulsory sale of a bank’s good assets to a sound bank, together with the assumption by that bank of all or most of the failed entity’s banking liabilities; or more simply an assisted merger. Here the prior availability of the necessary legal powers is critical, given the incentive for bank insiders to hang on, as well as the customary cognitive gaps causing insiders to deny the failure of their bank.

Most complex of all are the cases where disruption of banking is part of a wider financial and macroeconomic turbulence. In this case, the bankers may be innocent victims of external circumstances, and it is now that special care is needed to ensure that regulations do not become part of the problem. Regulatory forbearance on capital and liquid reserve requirements may prove to be appropriate in these conditions. Regulatory capital forbearance allows banks to avoid the cost of regulatory compliance, for example, by allowing banks to overstate their equity capital in order to avoid the costs of contractions in loan supply.

Adopting the correct approach to an emerging financial crisis calls for a clear understanding of what the underlying cause of the crisis is, as well as a quick judgment as to the likely effectiveness of the alternative tools that are available. The actions taken at this time will have a possibly irreversible impact on the ultimate allocation of losses in the system. In addition, the longer term implications in the form of moral hazard for the future also need to be taken into account.

All too often, central banks privilege stability over cost in the heat of the containment phase: if so, they may too liberally extend loans to an illiquid bank which is almost certain to prove insolvent anyway. Also, closure of a nonviable bank is often delayed for too long, even when there are clear signs of insolvency (Lindgren, 2003). Since bank closures face many obstacles, there is a tendency to rely instead on blanket government guarantees which, if the government’s fiscal and political position makes them credible, can work albeit at the cost of placing the burden on the budget, typically squeezing future provision of needed public services.

We collect information on the following crisis containment policies.

First, we collect information on whether the authorities impose deposit freezes, bank holidays, or blanket guarantee to stop or prevent bank runs.

• DEPOSIT FREEZE indicates whether or not the authorities imposed a freeze on deposits. If a freeze on deposits is implemented, we collect information on the duration of the deposit freeze (in months), and the type of deposits affected.

• BANK HOLIDAY indicates whether or not the authorities installed a bank holiday. In case a bank holiday is introduced, we collect information on the duration of bank holiday (in days).

• BLANKET GUARANTEE indicates whether or not the authorities introduced a blanket guarantee on deposits (and possibly other liabilities). In case a blanket guarantee is introduced, we collect information on the date of introduction and the date of removal of the blanket guarantee and compute the duration that the guarantee is in place (in months). We also collect information on whether or not a previous explicit deposit insurance arrangement was in place at the time of the introduction of the blanket guarantee, the name of the administering agency of the blanket guarantee, and the coverage of the guarantee (deposits or also other liabilities).

• TIMING OF FIRST BANK INTERVENTION indicates the date (month and year) that the authorities intervened for the first time in a bank.

• TIMING OF FIRST LIQUIDITY ASSISTANCE indicates the date (month and year) that the first loan under liquidity assistance was granted to a financial institution.

Next, we collect information on the timing and scope of emergency liquidity support to financial institutions.

• LIQUIDITY SUPPORT indicates whether or not emergency liquidity support, measured as claims from monetary authorities on deposit money banks (IFS line 12E) to total deposits, is at least 5 percent and at least doubled with respect to the previous year during the period [t, t+3], where t is the starting year of the banking crisis.

  In terms of liquidity support, we also collect information on whether or not liquidity support was different across banks, or whether or not emergency lending was remunerated. If liquidity support was remunerated, we collect information on whether or not interest was at market rates.

  We also collect information on the peak of liquidity support (in percent of deposits), computed as the maximum value (in percent) of the ratio of claims from monetary authorities on deposit money banks (IFS line 12E) to total deposits during the period [t, t+3], where t is the starting year of the banking crisis.

• LOWERING OF RESERVE REQUIREMENTS denotes whether or not authorities lowered reserve requirements in response to the crisis.

C. Crisis Resolution Policies

Once emergency measures have been put in place to contain the crisis, the government faces the long-run challenge of crisis resolution, which entails the resumption of a normally functioning credit system and legal system, and the rebuilding of banks’ and borrowers’ balance sheets.

At this point, the crisis has left banks and nonfinancial firms insolvent and many are in government ownership or under court or regulatory administration. Economic growth is unlikely to resume on a secure basis until productive assets and banking franchises are back in the hands of solvent private entities.

The financial and organizational restructuring of financial and non-financial firms during the crisis resolution phase is thus a large task, typically entailing much detailed implementation work in the bankruptcy courts, as well as the use of informal or ad hoc work-out procedures. There are also important trade-offs such as that between speed and durability of the subsequent economic recovery on the one hand, and the fiscal costs on the other.

Crisis resolution involves inherently complicated coordination problems between debtors and creditors. The fate of an individual corporation or financial institution and the best course of action for its owners and managers will depend on the actions of many others and the general economic outlook. Because of these coordination problems, as well as a lack of capital and the importance of the financial system to economic growth, governments often take the lead in systemic restructuring, especially of the banking system. In the process, governments often incur large fiscal costs, presumably with the objective to accelerate the recovery from the crisis.

The most recurrent question arising at this time is: should an overindebted corporate entity be somehow subsidized or forgiven some of its debt, or should its assets be transferred to a new corporate structure and new management? This question applies to undercapitalized banks and to overindebted nonbank corporations alike. The feasibility of making such decisions on a case-by-case basis becomes problematic during a systemic crisis resulting in thousands of insolvencies and it becomes necessary to establish a systematic approach. General principles have proved elusive and, as well as depending on the scale of the crisis and the quality of existing legal and other governance institutions, to an extent the best answer is likely to depend on the source of the crisis.