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Cita Diena2010-02-12 23:22

Eerie similarities…

The current crisis is by many associated with the ‘Swedish banks’ and the argument is that they should have known better since Sweden had experienced a banking crisis in the early 1990s; a banking crisis with elements eerily reminiscent of the ones that caused the crisis here: Credit boom, property boom, “house prices can only go up” etc.

I am not here to defend the Swedish banks – not at all – I am also somewhat stunned that their experience was used (remembered?) so little but take a look at the following quotation:

“The private sector was underdeveloped, and banks were not able to compile information about each customer’s capability to pay interest and repay credit in time. Enterprises’ business plans did not comply with market requirements and were often neither accurate nor safe.

Most of banks’ employees had no experience in banking under market conditions. This resulted in wrong assessment of submitted business plans, incorrect lending decisions, and inability to foresee the developments in the financial market and fluctuations of foreign exchange rates.”

Not a perfect assessment of 2004-07. But not too far off the mark either, right?

In fact, this was written* about the Latvian banking sector of 1993 – 1994 i.e. the one leading up to the banking crisis of 1995 where among others Banka Baltija, the biggest bank in the Baltics, collapsed.

By all means, blame the Swedes for the crisis – but perhaps a good chunk of the blame should stay here?

*Helmūts Ancāns, ch. 4 “Monetary Policy and Banking System”, p. 80. in “Latvia – Entering the XXIst Century”, edited by Juris Viksnins.

Morten Hansen is the Head of Economics Department, Stockholm School of Economics in Riga

Lasīt vairāk:
Citi raksti no Cita Diena
Slīcēja glābšana slīcēja rokās The eurozone is too big… Eerie similarities… Jemberga: Aizdomīgais miljons
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