Predictors of bank distress: The 1907 crisis in Sweden

Grodecka‐Messi, Anna; Kenny, Seán; Ögren, Anders

doi:10.1016/j.eeh.2020.101380

Cited by 13 publications

(5 citation statements)

References 97 publications

(49 reference statements)

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“…These banks lent to local industries, in particular to more export-oriented ones. As the crisis spread to Europe, companies had difficulties to repay their loans and the under-capitalised banks faced difficulties (Grodecka-Messi et al, 2021 andLönnborg, 2014). Four Swedish banks failed, five were recapitalised and more than ten were taken over by stronger rivals.…”

Section: Theoretical Take Off and Methodological Considerationsmentioning

confidence: 99%

Can regulations prevent financial crises? Uses of the past in the evolution of regulatory reforms in Sweden

Rognes

Larsson

2023

JFRC

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Purpose The purpose of this study is to examine whether regulations can prevent financial crises based on the case of Sweden in the 20th century. The evolution of banking regulation relies heavily on learning across borders as well as responding to recent and remembered crises. Sweden went from being an open economy with a highly protected national banking system with several banking crises under the Classical regime, through the Statist regime with no crises followed by abrupt liberalisation in the 1980s as the country changed to a more market-based regime. This study examines the regulatory responses to crises in each of these periods to assess how, and whether, an often backward-looking regulatory framework can address forward-looking risks. Design/methodology/approach This study is a qualitative study using a historical method. The authors use archival material, official publications and statistical data as well as secondary literature to succinctly analyse crises and regulatory responses in different regulatory regimes in the 20th century. The theoretical framework builds on three macro- and microeconomic policy regimes, the Classical, the Statist and the Market regime. Findings The authors find that regulations can play a decisive role in alleviating a banking crisis, but the relationship between regulations and economic development is complex, and regulations alone cannot prevent a crisis. Originality/value To the best of the authors’ knowledge, this is the first longitudinal study of banking regulations in Sweden and how these change in response to crises with the aim of improving the role of banks in financial intermediation and financial stability. This study contributes to a body of literature on financial crises with a long-term perspective and an assessment of regulations as a policy response.

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Section: Theoretical Take Off and Methodological Considerationsmentioning

confidence: 99%

Can regulations prevent financial crises? Uses of the past in the evolution of regulatory reforms in Sweden

Rognes

Larsson

2023

JFRC

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“…By contrast, it is challenging to find a consistent estimate for the timing of resolution interventions because rescues were organised ad hoc and through different legal devices. For the sake of consistency, 33 Colvin et al (2015) and Grodecka-Messi et al (2021)…”

Section: Data and New Distress Variablementioning

confidence: 97%

“…From this archival work, it emerges that Italian public authorities had an active policy of resolving distressed banks so that these did not have to file for bankruptcy. Like in other similar studies (Colvin et al 2015;Postel-Vinay 2016;Grodecka-Messi et al 2021), distress is defined ex post: it is the outcome that allows us to identify whether a bank is distressed or not. I classify the following outcomes as distress: (a) bankruptcies (i.e., in the Italian legal context, companies put into receivership); (b) dissolved companies where most of paid-up capital is lost 37 ; (c) mergers taking place to avoid (a) or (b); and (d) resolution actions requiring money injections from third parties.…”

Section: Data and New Distress Variablementioning

confidence: 99%

Credit Expansion, Leverage, and Banking Distress: The Puzzle of Interwar Italy

Molteni

2022

SSRN Journal

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“…An important reason for this was the banking crisis that began in the summer of 1907 which keep the supervisors busy until the end of the following year. While triggered by the international stock market and credit crisis, excessive domestic lending as well as rapid branch-network expansion were observed among most of Swedish banks that got into trouble (Grodecka et al 2018).…”

Section: Supervisory Activities Of the Bank Inspection Boardmentioning

confidence: 99%

Sweden: Early Adopter of Formal Banking Supervision with Incremental Steps

Hotori

Wendschlag

Giddey

2021

Formalization of Banking Supervision

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The banking supervision in Sweden was formalized incrementally over the last half of the nineteenth century when the banking sector grew and modernized. Swedish banking regulation developed out of the charter requirement, and the supervision out of the administration of the growing number of charter applications. With the creation of the Bank Bureau within the Ministry of Finance and the development of the Bank Inspector profession in the 1860s and 1870s, banking supervisory activities such as on- and off-site examinations became more frequent and standardized. The creation of the independent agency, the Bank Inspection Board, in 1906, and the transfer of supervisory executive powers from the Ministry of Finance to the new supervisory agency, were the final step of the formalization process. During the same period, banking regulation was harmonized and furthered a process of centralizations to the authorities in Stockholm.

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Predictors of bank distress: The 1907 crisis in Sweden

Cited by 13 publications

References 97 publications

Can regulations prevent financial crises? Uses of the past in the evolution of regulatory reforms in Sweden

Can regulations prevent financial crises? Uses of the past in the evolution of regulatory reforms in Sweden

Credit Expansion, Leverage, and Banking Distress: The Puzzle of Interwar Italy

Sweden: Early Adopter of Formal Banking Supervision with Incremental Steps

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