Finnish banks' problem assets : Result of unfortunate asset structure of too rapid growth?

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dc.contributor Suomen Pankki Solttila, Heikki Vihriälä, Vesa 2014-09-22T07:58:09Z 2014-09-22T07:58:09Z 1994
dc.identifier.isbn 951-686-435-X
dc.identifier.issn 0785-3572
dc.description.abstract The paper focuses on the proximate causes of the Finnish savings and cooperative banks' non-performing assets in the current banking crisis.Specifically, the effects of the lending structure at the outset of the crisis and the rate of growth of lending in the latter half of the 1980s are investigated.The main findings are: (1) Lending structure alone is not sufficient to explain the variation in the share of non-performing assets among the local banks.(2) Growth of lending is a major explanatory factor: the faster the growth in the second half of the 1980s, the higher the later share of non-performing assets.(3) Growth of lending is a particularly important "cause" in the case of the savings banks, where lending structure does not seem to have had much of an impact.(4) Lending to manufacturing, construction and trade has had a significant negative effect on the cooperative banks' asset quality.(5) Differences in the rate of lending growth go a long way in explaining why there are on average much more problem loans in the savings bank group than in the cooperative bank group.(6) The share of foreign currency loans is not an important factor when the effect of growth is accounted for, although the roles cannot be fully separated due to multicollinearity.(7) Assuming that growth of lending is more under the control of a bank than the structure of lending, the findings support the view that "bad luck" is not the only explanation of the Finnish banking problems but "bad banking" in the form of either ignorance of risks or deliberate risk taking is a major factor as well.
dc.format.extent 31 s.
dc.language.iso eng
dc.relation.ispartofseries Bank of Finland Research Discussion Papers
dc.subject Suomi
dc.subject luottotappiot
dc.subject pankkitoiminta
dc.subject luotot
dc.subject luotonanto
dc.subject SP
dc.subject RP
dc.subject RM
dc.title Finnish banks' problem assets : Result of unfortunate asset structure of too rapid growth?
dc.type Sarjajulkaisu
dc.identifier.urn URN:NBN:fi:bof-20140807310 Suomen Pankin keskustelualoitteita Bank of Finland. Discussion papers
dc.series.year 1994
dc.series.number 23/1994
dc.series.sortingnumber 23 19.12.1994
dc.contributor.orgunit Tutkimusosasto
dc.contributor.orgunit Research Department

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