Financial Crisis and EU Banks’ Performance

Ted Lindblom and Magnus Willesson

Chapter 2 in Crisis, Risk and Stability in Financial Markets, 2013, pp 24-48 from Palgrave Macmillan

Abstract: Abstract The financial crisis at the end of the past decade clearly disclosed the vulnerability of globally interconnected financial systems in times of recession. Financial problems and failures on the US financial market in autumn 2008 almost immediately contaminated financial systems and institutions worldwide. The practical meaning of theoretically defined concepts like ‘systemic risk’ and particularly ‘counterparty risk’ and ‘liquidity risk’ became very apparent and real not only for banks and other financial institutions, but also for their customers and society as a whole. Risk premiums charged on money and capital markets were immediately increased up to levels that made refinancing on these markets extremely expensive. In many countries the financial system was more or less on the verge of collapse; without the rescue actions of central banks and governments, it is highly likely that a substantially larger number of banks would have entered into bankruptcy than actually did so. Lind-blom, Olsson and Willesson (2011) report that the guarantee programme introduced into the Swedish market had already been utilized from the start by domestic banks in general, and by one of the four large commercial banks in particular. In their study they find that this programme allowed the banks to operate without major constraints during the crisis and, hence, to perform rather well in their home market.

Keywords: Credit Risk; Commercial Bank; Saving Bank; Liquidity Risk; Interest Rate Risk (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-1-137-00183-2_3

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DOI: 10.1057/9781137001832_3

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