Determinants of Ex-Ante Banking System Distress: A Macro-Micro Empirical Exploration of Some Recent Episodes

Although financial crisis have a long history, in the past two decades many countries have experienced episodes of significant financial sector distress.2 Several recent periods of banking system distress have been associated with currency crises. Perhaps the most acute among the recent experiences are the financial problems encountered by some emerging markets. The current banking system problems that begun in the mid-1990s in Asia (including Thailand, Indonesia, and Korea) have also made apparent the possibility of regional contagion. In Latin America, severe banking crises also occurred in Mexico, Argentina and Venezuela in the first half of the 1990s, and in Chile and Colombia in the 1980s. But banking crises are not events reserved only for emerging economies. Episodes of significant banking system distress have been evident in Japan since the mid-1990s, in the Nordic countries during the early 1990s, and in the United States during the mid-1980s and early 1990s. Although with less intensity, banking problems have also recently afflicted countries like France and Italy.