Essay About Previous Chapter And Financial Crises

Beyond Group Lending
The previous chapter looked at the causes of bank failures; here, the emphasis shifts to
financial crises, often caused by the collapse of a bank or banks. The objective is to
explore the definitions, causes and consequences of financial systems in crisis. Section 8.2
looks at the controversies surrounding the different definitions of financial crises, and the
costs of resolving more recent crises. Section 8.3 conducts extensive reviews of the crises
in three South East Asian economies; those of Japan and Scandinavia are explored in
sections 8.4 and 8.5. While there are some similarities in the factors leading up to these
crises, the approaches taken to resolve them have been quite different. The choice of
countries is deliberate. It covers a continuum, from relatively underdeveloped, such as
Indonesia, to newly industrialised (Korea), to small open advanced economies, to the
second largest economy in the world. It shows that no country is exempt from crises and
their resolution can be complex and costly. The case of Long-Term Capital Management
is discussed in section 8.6, to provide another contrast – a non-bank financial institution,
the sudden collapse of which, some argue, threatened the world financial order, prompting
a lifeboat rescue organised by the US central banking authorities. Given the need for
intervention by central banks, other government agencies, the IMF (in the cases of