Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/209962 
Year of Publication: 
2010
Series/Report no.: 
Working Paper No. 2010/17
Publisher: 
Norges Bank, Oslo
Abstract: 
How does the management and resolution of the current crisis compare with the response of the Nordic countries in the early 1990s, widely regarded as exemplary? We argue that, while intervention has been prompter, the measures taken so far remain less comprehensive and in-depth. In particular, the cleansing of balance sheets has proceeded more slowly, and less attention has been paid to reducing excess capacity and avoiding competitive distortions. In general, policymakers have given higher priority to sustaining aggregate demand in the short term than to encouraging adjustment in the financial sector and containing moral hazard. We argue that three factors largely explain this outcome: the more international nature of the crisis; the complexity of the instruments involved; and, hardly appreciated so far, the effect of accounting practices on the dynamics of the events, reflecting in particular the prominent role of fair value accounting (and mark to market losses) in relation to amortised cost accounting for loan books. There is a risk that the policies followed so far may delay the establishment of the basis for a sustainably profitable and less risk-prone financial sector.
Subjects: 
crisis management and resolution
principles for successful resolution
nordic countries
fair value and amortised cost accounting
mark to market losses
JEL: 
G01
G21
G28
Persistent Identifier of the first edition: 
ISBN: 
978-82-7553-567-0
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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