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by O. Emre Ergungor and James B. Thomson


Systemic Banking Crises

F E B R UA R Y 2 0 0 5



Systemic Banking Crises

O. Emre Ergungor is an economic
advisor at the Federal Reserve
Bank of Cleveland. James B.
Thomson is a vice president and
economist at the Bank.

by O. Emre Ergungor and James B. Thomson
Systemic banking crises can have devastating effects on the economies of developing or industrialized
countries. This Policy Discussion Paper reviews the factors that weaken banking systems and make
them more susceptible to crises.

Materials may be reprinted if the
source is credited. Please send
copies of reprinted materials to
the editor.
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Federal Reserve Bank of Cleveland or of the Board of Governors of the Federal Reserve System.

ISSN 1528-4344


When a financial system is hit or threatened by widespread bank failures, as in Latin America,
Scandinavia, Southeast Asia, or Japan in the 1990s, the cost of resolving the crisis and recapitalizing the
banks can be enormous (see Figure 1). After the Indonesian banking crisis of 1997–1998, for example,
recapitalizing the banking system (making up for the affected banks’ past and present losses) cost taxpayers around $77 billion—58 percent of Indonesia’s average GDP in 1998–2001. The Indonesian
Banking Restructuring Agency, established to repair the banking system, is expected to recover only about
$2 billion from the sale of banks under its control. An even more expensive banking debacle in dollar
terms is the one that began in Japan in the early 1990s. By 1998, nonperforming loans were estimated
at $725 billion (18 percent of Japan’s GDP).1 The Obuchi Plan announced the same year provided

1. Caprio and Klingebiel 2002.

$500 billion (12 percent of GDP) in public funds for loan losses, bank recapitalizations, and depositor
protection.2 These figures do not include the cost of keeping so-called zombie borrowers—companies
that continue to exist only because their banks extend further credit—in business. On the other hand,
they do not necessarily include funds recovered in later years.

2. There were bank bailouts in later
years. For example, in 2003,
Resona was bailed out for
$7.5 billion.


Argentina 1980
Indonesia 1997
Chile 1981
Thailand 1997
Uruguay 1981
Korea, Rep. of 1997
Cote d'Ivoire 1988
Venezuela, RB 1994
Japan 1992
Mexico 1994
Malaysia 1997
Slovenia 1992
Brazil 1994
Philippines 1983
Bulgaria 1996
Ecuador 1996
Czech Republic 1989
Finland 1991
Hungary 1991
Senegal 1988
Norway 1987
Spain 1977
Paraguay 1995
Colombia 1982
Sri Lanka 1989
Malaysia 1985
Sweden 1991
Indonesia 1992
Poland 1992








SOURCES: Honohan, Patrick, and Daniela Klingebiel, 2002. “Controlling the Fiscal Costs of Banking
Crises.” In Managing the Real and Fiscal Effects of Banking Crises, edited by Daniela Klingebiel and Luc
Laeven. World Bank Discussion Paper no. 428, pp. 31–49, Washington, D.C.: World Bank.

The fiscal costs of restructuring may seem extremely large at first, but they often pale in comparison to the long-term effects of systemic banking crises. The resources committed to resolving a crisis
are diverted from other productive uses, economic reforms are delayed, and stabilization programs are
abandoned. The economy suffers from higher interest rates, lower growth, and higher unemployment


N U M B E R 9 , F E B R UA R Y 2 0 0 5

for a protracted period. Because nearly every citizen is affected by the declining living standards
brought on by large banking crises, the public should understand the factors that weaken a banking
system and make it susceptible to systemic crises.
In this Policy Discussion Paper, we review the factors that seem to be common to banking crises
around the globe, both in developing countries and industrialized ones. We focus primarily on the
factors that weaken banks, rather than macroeconomic factors that may push weak banking systems
over the edge.3 Admittedly, macroeconomic shocks place great strain on banking systems and may be
the common trigger for crises. But not all banking systems collapse when buffeted by such shocks

3. On the effect of macro factors, see,
for example, Demirguc-Kunt and
Detragiache 1998.

(examples are the Philippines, Singapore, and Hong Kong). One needs to look closely at the institutional, structural, and regulatory/political environment of a nation’s financial system for the ultimate
cause of a banking system collapse.

What Is a Systemic Banking Crisis?
Banks take on and manage risk, and some bankers are better at it than others. So there will always be
occasional bank failures even in healthy financial systems. In fact, isolated bank failures contribute to
the efficiency of financial markets because they enable resources to be reallocated from poorly managed and inefficient banks to well-managed institutions. Even otherwise well-managed banks may fail
as a result of overexposure to risk emanating from events thought to be so unlikely that the risk is often
acceptable to bankers and regulators before the event occurs. These failures, while often spectacular,
are isolated events with limited impact on the stability of the financial system and on people’s confidence in it.
In a systemic crisis, multiple banks fail simultaneously, and the collective failure impairs enough of
the banking system’s capital so that large economic effects are likely to result and the government is
required to intervene. But how big is “enough”? There is no precise answer to this question. Typically,
researchers have examined the statements and actions of a country’s central bank to classify a banking system problem as a systemic one. In other words, when central bankers think that a particular shock to the
financial system could develop into a systemwide problem, the problem is considered systemic.4 For practical purposes, if the capital of the banking system is almost or entirely wiped out by loan defaults, the
crisis is systemic for sure. By this definition, the banking crises in Southeast Asia, Latin America, Japan,
Russia, and Scandinavia qualify as systemic events. On the other hand, the savings and loan debacle and
the regional banking crises of the 1980s in the United States do not meet the definition of a systemic
banking crisis. For while the government interceded to the tune of $160 billion (1995 estimate), this
amount is very small relative to the size of the U.S. economy and its financial sector.

What Causes Systemic Banking Crises?
Contagious bank runs are the source of systemic instability under what might be called the classic view
of systemic banking crises. Under this view, the revelation of solvency problems at one bank can result
in runs by depositors on other banks in the system. In the absence of some intervention by a central
bank or another lender of last resort, the liquidity pressures on the banking system can lead to the
decapitalization of a large number of banks and hence, a systemic collapse. The classic view holds that
three conditions must be present for contagious bank runs to occur. First, banking assets must be

4. Caprio and Klingebiel 1997.


sufficiently opaque to a large number of depositors—small depositors—so that they have difficulty
determining whether new information about the quality of assets at one bank has implications for the
quality of assets (and by implication, solvency) of their bank. In other words, small depositors must be
rationally ignorant. If they are, they are unlikely to have good information on the quality of their
bank’s assets. Depositors who cannot clearly distinguish between healthy banks and weaker ones may
run on healthy banks as a means of protecting their savings because they perceive some similarities
with the failing banks (such as asset size, location of the lending market, or capital level). The second
condition is a sequential servicing constraint, which requires withdrawals to be paid at par until the
bank is closed. Sequential servicing provides depositors the opportunity to protect themselves by withdrawing their funds early (which in turn increases the losses to depositors remaining when the bank is
closed). Viewed from this perspective, bank runs are a rational response to an information shock. The
third condition is a lack of sufficient private arrangements for providing liquidity to banks that face
runs or a properly functioning lender of last resort. After all, the most effective mechanism for stopping a bank run on a solvent institution is to provide sufficient liquidity to that institution. This allows
the bank to signal its solvency to depositors by meeting all claims presented for redemption.
Although the classic view tells how contagion may work, contagion does not appear to be the main
source of the banking crises of the last 20 years. In many instances, depositors were protected by
deposit insurance, which reduces their incentive to run on their banks. Depositors know they will get
their money back even if the bank fails, so they don’t rush to the bank to be first in line to withdraw
their deposits. In fact, research on recent international banking crises points to causes far different from
contagious bank runs by informationally disadvantaged small depositors.
Close scrutiny of these crises suggests, not surprisingly, that the vulnerability of the affected financial systems to systemic collapse was a product of the underlying incentives faced by banks, bank regulators, and other financial market participants. Crisis episodes across countries show similar characteristics, although triggering events may be different and the severity of the crisis may be worsened by
the level of corruption or fraud (such as the prevalence of politically-directed loans to failing businesses) present in a particular country. But because crises can occur even in the absence of corruption or
fraud, we focus solely on the economic incentives.
Crises tend to follow periods of expansionary monetary and fiscal policy and typically include
some form of financial liberalization. For instance, as part of growth initiatives, governments remove
interest rate ceilings on deposits, rescind laws that restrict the entry of new banks into a market, or let
banks engage in previously restricted activities such as foreign borrowing. In general, reforms expand
the set of activities depositories can engage in, allowing more flexibility in asset allocation decisions.
Financial liberalization often includes reforms aimed at providing corporations, which were previously dependent on bank loans, with greater access to financial markets using corporate bonds and commercial paper.
To the extent that financial reforms lead to a more competitive market, one would expect an
increase in the failure rates of banks and other financial firms. After all, banks will respond to higher



N U M B E R 9 , F E B R UA R Y 2 0 0 5

competition and a shrinking customer base by charging lower rates on loans. With increasing competition in the deposit market, banks’ funding costs may rise because they have to pay higher rates to
attract deposits from competitors. As revenues decrease and costs rise, lending margins shrink as
monopoly rents are competed away. Poorly performing institutions will see their economic capital
erode, and they could face the prospect of closure by banking regulators.
If governments are reluctant to close nonviable depository institutions, however, a problem
arises—particularly when the government guarantees the lion’s share of bank liabilities by de facto
(through deposit insurance) or de jure (through capital forbearance polices) means. As insured depositories slide toward economic insolvency, the moral hazard incentives associated with a governmentprovided financial safety net increase dramatically.5 As banks facing capital pressures attempt to

5. Cull, Senbet, and Sorge 2004.

increase their returns, they respond to declining margins by shifting their portfolios toward higher-risk
assets and funding their investments with short-term funds, often without properly hedging against
the interest rate risk, even when such a strategy reduces risk-adjusted returns.
A factor critical in making this strategy especially attractive is a long period of expansionary monetary policy with negative short-term real interest rates; that is, a period in which funding costs are low
and short-term investments are unattractive. Expansionary monetary policy also exacerbates the moral
hazard problem, as excessive money growth may manifest itself as an increase in the value of asset
prices, thus stimulating the demand for real estate, stocks, and consumer loans. Rising asset prices will
distort lending and borrowing decisions by giving rise to the impression that the return from activities
such as real estate lending and investing is rising and the risk is falling. Banks respond to these incentives by increasing their exposure to these markets. It is important to emphasize that banks may be
acting rationally when they engage in these activities. For example, the demand for real estate leads to
higher real estate prices and declining loan-to-value ratios over time. So a bank’s exposure seems to be
declining as the value of the collateral increases. This is true, of course, as long as one believes that the
asset prices will continue to grow. But even when bankers realize that the trend is unsustainable, they
may continue to lend with the expectation that they can extricate themselves from these loans and
investments before the market peaks (overconfidence bias). It is also quite difficult to predict the peak
of a market, which may be years ahead; before that time, a banker may have trouble explaining to
shareholders why he is sitting on the sidelines while other banks are making money.
Some behavioral studies have also explained bankers’ actions as disaster myopia; that is, large economic shocks occur so infrequently that bankers often underestimate shock probabilities.6 Amos

6. Herring and Wachter 2002.

Tversky and Daniel Kahneman have shown that the subjective probability of an event is determined
by the ease with which a decision maker can imagine the event to occur, which, in turn, depends on
the frequency of the event.7 Although subjective probabilities can be very close to actual probabilities

7. Tversky and Kahneman 1982.

for high-frequency events (such as estimating credit card default probabilities), they can be well off the
mark if the event is low frequency and the time elapsed since the last occurrence affects the ease of
recall (availability bias). When the subjective probability falls below a certain mental threshold, bank
managers may assign zero probability to the shock (threshold heuristic). Early warning signals are often
ignored as decision makers tend to search for and pay attention to information that strengthens their
expectations and predictions. Following a similar bias, ambiguous signals are interpreted in a way
consistent with expectations.8

8. Willett 2000..


The crucial point here is that when some bankers begin pricing loans by myopically assigning low
(or zero) weight to certain types of shock, banks that properly estimate the probability of the shock
and price it cannot compete with them.9 When the next shock hits in the future, the market may be

9. Guttentag and Herring 1986.

dominated by myopic banks, which don’t have any protection against that particular shock—an
outcome sometimes described as herd behavior by banks. Admittedly, we cannot determine whether
overconfidence bias or disaster myopia plays a more crucial role in systemic banking crises. The end
result of both, however, is the same. In the absence of a shock, the lending continues, coupled with
increasing asset prices and a booming economy.
Despite the rosy economic picture, investors may recognize that lending aggressively in the real
estate market or investing in stocks subjects the banks to the vagaries of these markets, but they also
recognize that all banks are in this business and no government can afford to let its entire banking system collapse.10 This latter point is equivalent to an implicit government guarantee. So, even if there
is no explicit government guarantee such as deposit insurance, the implicit guarantee is always there,

10. Burnside, Eichenbaum, and
Rebelo 1999.

preventing investors from fully pricing the risk they observe into banks’ cost of funds and allowing
banks to continue their lending policies.11 At some point, some investors may begin to doubt whether
the government’s resources will be enough to save the entire banking system, but those investors—
mostly foreigners—often find comfort in believing that the IMF can always put a rescue package
together. In addition, investors are often overconfident about their ability to evaluate the situation and

11. One could repeat the “disaster
myopia” argument for investors.
However, we believe this is a
secondary issue in the face of
strong economic incentives to
rationally downplay risk.

identify the right time to exit a collapsing market before anybody else does. So they do not hesitate to
fund the banks’ aggressive lending policies.12
Eventually, asset prices reach unsustainable levels and inflation picks up. Governments are forced

12. Cargill, Hutchinson, and Ito 1998;
Willett 2000.

to reverse stimulative economic policies by raising interest rates or putting caps on loan growth.
Economic growth slows, depressing asset prices and lowering borrowers’ ability to pay. As declining
margins and increasing loan defaults erode banks’ capital, bankers, who surmise that a banking system
collapse is politically undesirable, anticipate a state bailout and take actions that would make it difficult for the government to evade a bailout. In essence, bankers have an incentive to engage in activities that cause the risk of their balance sheet to be highly correlated with their peers, which is another
way of characterizing herd-like behavior.13 The incentive to engage in herd-like behavior is the protection it affords if the loans go bad—the so-called “too many to fail” policy. With a whole herd at risk
of failing, the government is more apt to step in and rescue failing banks. Banks recognize that the
government guarantee allows them to reap the benefits of high-risk investments, while it limits their
downside risk. If a bank becomes decapitalized, it has strong incentives to adopt go-for-broke risktaking strategies—known as gambling for resurrection. If the gamble pays off, the bankers will keep
their jobs with their reputations intact.14 Unfortunately, the gamble fails more often than not and by
the time the government and regulators intervene, the losses can reach staggering levels.

13. Penati and Protopapadakis
(1998) show how the federal
financial safetynet provided
incentives for banks to take on
correlated risks. These incentives
increase the correlation of risk
across the banking system and are
used to explain the overexposure
to and under pricing of loans to
developing nations.
14. De Juan 1988.

This brings us to the last critical player in the banking market: regulators. Regulators’ task is to
protect the taxpayer by supervising banks and maintaining a healthy banking system. Why do regulators sometimes fail to discipline banks pursuing high-risk growth strategies? In some instances, the reasons may be beyond the regulators’ control. For example, regulatory agencies may face staffing and
other budgetary constraints that limit their ability to effectively supervise the banking system.15

15. Drees and Pazarbasioglu 1998.



N U M B E R 9 , F E B R UA R Y 2 0 0 5

A more frequently cited reason, however, is regulators’ reluctance to discipline banks.16 This is due to
several factors. Primarily, when financial liberalization is part of a set of broader policies aimed at pro-

16. See below and the Case Studies

moting economic growth, bank regulators may be hesitant to close insolvent banks and bring regulatory sanctions against banks pursuing high-risk strategies because, in the short run, these strategies will
appear to be profitable, masking any underlying insolvency of the bank. Also, there will be tremendous political pressure on bank regulators to sit on the sidelines, as the expansion of the financial
sector is seen as an important driver of economic growth.17 Moreover, as liberalization changes the
financial landscape, regulators may be reluctant to take drastic actions as they learn about and adapt

17. See Goodhart’s (2000) discussion
of the organization of banking
supervision in emerging market
countries and Iwasaki 1999.

to their new environment. Principal-agent theory suggests that as the banks dig themselves into a deeper hole, regulators may be unable or unwilling to acknowledge unpleasant facts about the industry
because it reflects badly on their reputation and future career opportunities. Models of regulator selfinterest have been shown to explain regulator behavior in the U.S. during the 1980s savings and loan
debacle.18 So it is privately optimal for the regulators to delay taking corrective actions early on. This

18. See Kane 1989 and Boot and
Thakor 1993.

factor is exacerbated by time inconsistency—losses today are not realized until a future date and,
hence, may occur on someone else’s watch. Forbearance is particularly likely when the destabilization—that is, the decapitalization—of the system appears to be a consequence of an external factor
such as a macroeconomic shock. In this case, regulators forbear (and do not close any individual bank),
while the eventual market correction occurs, and falling asset prices decapitalize the banks.

Case Studies
In most of the systemic banking crises around the globe that have been scrutinized by economists, one
can see the footprints of a number of common factors. These studies of failed banking systems routinely point to explicit (codified) or implicit government guarantees, inadequate bank supervision, and
herd behavior by bankers as contributing factors. Thailand and Japan are two good examples of why
these factors, rather than contagion, seem to give us a more accurate picture about the causes of systemic banking crises.
In the early 1990s, the Bank of Thailand implemented a comprehensive financial liberalization program, which allowed greater competition in the banking sector. The program also allowed banks to
establish offshore banking facilities known as Bangkok International Banking Facilities. These
facilities were intended to attract large amounts of foreign capital to sustain the fast-growing Thai
economy with large current account deficits. Thai banks and finance companies borrowed short-term
dollars using these offshore facilities, converted them to bahts at the pegged exchange rate, and aggressively made real estate loans. Foreign investors, convinced that the government and the IMF would
bail out creditors in a crisis, did not hesitate to invest in Thailand, exploit the higher rates in the Thai
local market, and fund the banks’ aggressive lending


In 1994, the IMF warned Thailand

19. See Abe 1999 and Drees and
Pazarbasioglu 1998.

that it needed greater flexibility in its exchange rate regime to slow down the inflow of short-term
capital. The central bank, reluctant to put a stop to the impressive economic growth of the preceding
years, ignored the warnings.20 Soon, growth in the real estate sector reached unsustainable levels.
Studies from that period report office vacancy rates in Bangkok exceeding 20 percent in 1996.

20. Abe 1999.


There were 300,000 unoccupied new housing units while the annual demand for new housing rarely
exceeds 120,000.
Despite the aggressive lending, regulatory standards for credit quality were lacking, and no serious
attempt was made to correct the poor management practices of commercial banks, which hand been
documented after an earlier crisis in the 1980s. In addition, no policies were put in place to discourage loan concentration in a single sector.21

21. Gup and Nam 1999.

Thailand’s luck ran out when the U.S. dollar appreciated against the Japanese yen and the German
mark in 1996–97. Japan was Thailands major trading partner because of the dollar peg, the baht also
appreciated against those currencies. As a result of this appreciation, Thai exports, already under pressure from increasing labor costs, lost their competitiveness and sank deeper. In late 1996 and early
1997, speculators began to attack the dollar peg, convinced that the poor health of the Thai economy
did not justify the valuation of its currency. The deteriorating situation was made worse when Thailand
implemented a recommendation made by the IMF in August of 1997, which was to raise interest rates
and use fiscal restraint. The logic of this recommendation is still bitterly contested.22 Those opposing
it argue that higher rates were devastating for the highly leveraged economy. Those supporting it argue

22. See Iwasaki 1999 and Herring

that higher rates were necessary to stop the capital flight and put an end to the decline in the exchange
rate, which could have created inflation down the road and necessitated more severe austerity measures. As interest rates started climbing and government spending fell, the economy sank into a deep
recession, real estate prices collapsed, and loans made to real estate developers soured. Because the
banking system carried excessive exposure to the real estate sector, nonperforming loans in the banking system reached 46 percent of total loans at the end of 1998. Net losses arising from the banking
crisis were estimated at $60 billion, or 42 percent of the GDP in 1999.
Japan is a prime example of how things can go wrong in an industrialized country. By the late 1980s,
increased competition had led to declining interest-rate margins for Japanese banks. Deregulation then
allowed banks to expand their lending to the higher-risk-higher–margin sectors, such as real estate and
small and medium-sized enterprises. Tax policy made investments in land with borrowed money
attractive to investors seeking to lower ordinary and estate taxes. As real estate prices climbed, credit
standards began to loosen as bankers increasingly relied on the value of the collateral more than the
borrowers’ future cash flows when assessing the probability of repayment.23 In order to gain market

23. Kanaya and Woo 2001.

share, banks accelerated their loan approval process by transferring the responsibility for credit risk
evaluation from their independent credit bureaus to credit monitoring departments under their sales
divisions. This proved to be a fatal mistake. Sales divisions were rewarded for higher market share; they
were more interested in approving the loans than adequately evaluating the credit risk. This lack of discipline was further encouraged by the common belief in the market that the government would come
to the rescue in a crisis; the government did nothing to dismiss this belief. When property prices took
a nosedive in 1992, the quality of loans to the real estate industry deteriorated rapidly; the collateral
declined in value, and slowing economic growth reduced the ability of borrowers to continue to service their loans. Concurrently with these events, the Japanese stock market bubble burst, erasing banks’



N U M B E R 9 , F E B R UA R Y 2 0 0 5

gains on their stock holdings. Banks were left without a cushion to absorb their losses in the real estate
market. They became reluctant to let their borrowers default, because recognizing those losses would
wipe out their entire capital and render the banking system insolvent—not an economically or politically desirable outcome. So banks and regulators took a gamble.24 Banks went on restructuring nonviable loans by reducing interest rates and extending their maturity. They also offered new credit lines
so that borrowers could pay their overdue loans. The hope was that these businesses would recover in
time or the banks would build enough capital to absorb the losses. But the gamble did not pay off.
Extensions followed one another, and losses snowballed. As a result of this forbearing lending strategy,
relaxed credit conditions to boost short-term profits, and the lack of regulatory pressure on banks to
restrain their asset growth, nonperforming loans on the books grew from 40 trillion yen in 1995 to 88
trillion yen in 1998 (about $725 billion, or 18 percent of GDP).

Concluding Remarks
Banking crises can have devastating effects on the economies of developing and industrialized countries. In addition to the taxpayer costs of recapitalizing the banks, banking crises have negative longterm effects on the economy, such as slow growth, high interest rates, and lower living standards.
Bank regulators and governments often blame contagion as a major reason the crisis spreads within the country and across international borders. Although the experience over the last 20 years does
not rule out contagion as a factor, close scrutiny reveals some factors common to all systemic crises,
such as herd behavior by bankers, implicit government guarantees, and regulatory policies that do not
encourage adequate risk management. A better understanding of these common factors by the general public, who always end up footing the bill, may prevent these costly disasters from happening in the


24. Kanaya and Woo 2001.


Recommended Reading
For more detailed discussion on the causes of banking crises, we recommend:
Abe, Kiyoshi, 1999. “Financial Crisis in Thailand.”In International Banking Crises: Large-Scale Failures,
Massive Government Interventions, edited by Benton Gup. Westport, Conn.:Quorum Books.
Boot, Arnoud W. A., and Anjan V. Thakor, 1993. “Self-Interested Bank Regulation,” American Economic
Review, 83 (May), 206–12.
Drees, Burkhard, and Ceyla Pazarbasioglu, 1998. “The Nordic Banking Crises: Pitfalls in Financial
Liberalization?”International Monetary Fund Occasional Paper 161, Washington, D.C.: International
Monetary Fund.
Burnside, Craig, Martin Eichenbaum, and Sergio Rebelo, 1999. “What Caused the Recent Asian
Currency Crises?”In The Asian Financial Crisis: Origins, Implications, and Solutions, edited by William
C. Hunter, George G. Kaufman, and Thomas H. Krueger. Norwell, Mass.:Kluwer Academic
Caprio, Gerard, and Daniela Klingebiel, 1997. “Bank Insolvency: Bad Luck, Bad Policy, or Bad
Banking?” World Bank Economic Review (January).
Caprio, Gerard, and Daniela Klingebiel, 2002. “Episodes of Systemic and Borderline Banking Crises.”In
Managing the Real and Fiscal Effects of Banking Crises, edited by Daniela Klingebiel and Luc Laeven.
World Bank Discussion Paper no. 428, 31–49, Washington, D.C.: World Bank.
Cargill, Thomas F., Michael M. Hutchinson, and Takatoshi Ito, 1998. “The Banking Crisis in Japan.”In
Preventing Bank Crises: Lessons From Recent Global Bank Failures, edited by Gerard Caprio, William C.
Hunter, George G. Kaufman, and Danny M. Leipziger. Washington, D.C.: Federal Reserve Bank of
Chicago and the Economic Development Institute of the World Bank.
Cull, Robert, Lemma Senbet, and Marco Sorge, 2004. “Deposit Insurance and Bank Intermediation in
the Long Run,”Bank for International Settlement Working Paper no. 156 (July).
De Juan, Aristóbulo, 1988. “From Good Bankers to Bad Bankers: Ineffective Supervision and Managerial
Deterioration as Major Element in Banking Crises.” Economic Development Institute of the World
Bank Working Paper. Washington, D.C.: World Bank.
Demirguc-Kunt, Asli, and Enrica Detragiache, 1998, The Determinants of Banking Crises in Developing
and Developed Countries, IMF Staff Papers 45, March, pp. 81-109.
Demirguc-Kunt, Asli, and Enrica Detragiache, 2002. “Does Deposit Insurance Increase Banking System
Stability? An Empirical Investigation,” Journal of Monetary Economics 49:1373–1406.
Dinc, Serdar, and Patrick McGuire, 2003. “Did Investors Regard Real Estate as ‘Safe’ During the
‘Japanese Bubble’ in the 1980s?” unpublished manuscript, University of Michigan.
Goodhart, Charles, A. E., 2000. “The Organisational Structure of Banking Supervision” FSI Occasional
Papers no. 1 (November).



N U M B E R 9 , F E B R UA R Y 2 0 0 5

Gup, Benton E., and Doowoo Nam, 1999. “Thailand: A Tale of Sustained Growth and Then Collapse.”
In International Banking Crises: Large-Scale Failures, Massive Government Interventions, edited by
Benton Gup. Westport, Conn.: Quorum Books.
Guttentag, Jack M,. and Richard J. Herring, 1986. “Disaster Myopia in International Banking,”
Princeton University Essays in International Finance, no. 164 (September).
Herring, Richard J., 1999. “Comment on ‘Asian Crisis: Causes and Remedies.’” In The Asian Financial
Crisis: Origins, Implications, and Solutions, edited by William C. Hunter, George G. Kaufman, and
Thomas H. Krueger. Norwell, Mass.:Kluwer Academic Publishers.
Herring, Richard J., and Susan Wachter, 2002. “Bubbles in Real Estate Markets,” University of
Pennsylvania Wharton School Zell/Lurie Real Estate Center Working Paper no. 402.
Iwasaki, Yoshihiro, 1999. “Whither Thailand?” In The Asian Financial Crisis: Origins, Implications, and
Solutions, edited by William C. Hunter, George G. Kaufman, and Thomas H. Krueger. Norwell,
Mass.:Kluwer Academic Publishers.
Kanaya, Akihiro, and David Woo, 2001. “The Japanese Banking Crisis of the 1990s: Sources and
Lessons,” Princeton University Department of Economics Essays in International Economics no. 222
Kane, Edward J., 1989. The S&L Insurance Mess: How Did It Happen? Washington, D.C.:The Urban
Institute Press.
Nam, Doowoo, and Benton E. Gup, 1999. “The Economic Crisis of Indonesia.” In International Banking
Crises: Large-Scale Failures, Massive Government Interventions, edited by Benton Gup. Westport,
Conn.:Quorum Books.
Penati, Alessandro; and Aris Protopapadakis, 1988. “The Effect of Implicit Deposit Insurance on Banks’
Portfolio Choices with an Application to International Overexposure,” Journal of Monetary Economics
21: 107–26.
Schwartz, Anna J., 1987. “The Lender of Last Resort and the Federal Safety Net,” Journal of Financial
Services Research 1:1–17.
Tversky, Amos, and Daniel Kahneman, 1982. “Availability: A Heuristic for Judging Frequency and
Probability.” In Judgment under Uncertainty: Heuristics and Biases, edited by D. Kahneman, P. Slovic,
and A. Tversky. New York: Cambridge University Press, pp. 163–78.
Willett, Thomas D., 2000. “International Financial Markets as Sources of Crises or Discipline: The Too
Much, Too Late Hypothesis,” Princeton University Department of Economics Essays in International
Finance no. 218 (May).


P. O. B OX 6 3 8 7

Presorted Standard
U.S. Postage Paid
Cleveland, OH
Permit No. 385

C L E V E L A N D , O H I O 4 4 10 1

Return Service Requested:
Please send corrected mailing
label to the Federal Reserve
Bank of Cleveland, Research
Department, P.O. Box 6387,
Cleveland, Ohio 44101.

Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102