The 1985-1994 Global Real Estate Cycle. Page 25 personal sector into commercial lending and foreign currency to the marginal customers of the banking system (Skopbank, Savings Bank of Finland). Given the systemic nature of the crisis in Nordic countries, financial authorities have had to resort to a wide variety of rescue instruments, regulatory actions, closures, and sanctions which do not need to be detailed. Loan losses as a percentage of total assets ranged between 3% and 4.5% in 1992. Excess capacity in the banking system is being reduced steadily, and so is the number of bank employees.

The role of real estate and construction loans in bank problems has been disproportionately high. This can be illustrated _de minimis_ by the case of Finland where the macroeconomic collapse also severely affected the balance-sheets of a wide variety of corporations and the household sector as well. In Finland, the relative weight of real estate can be expected to smaller than in other countries. As seen in Table 1, by the end of 1992, real estate loans made up 5.7% of the total banking portfolio. They represented 16.4% o non-performing assets, and 20.5% of all loans and guarantees write-offs. The two other main corponents of non-performing assets are construction and household loans. Construction accounts for another 11.85 of write-offs which is not very surprising, especially in the Finnish context. More remarkable is the fact that household loans are the largest component of non-performing loans with a 21.1% share. Due to massive extemal shocks and the accelerator effect of the crash, GNP fell by 15% in two years and unemployment rose to 22% by the end of 1902. Because household loans are _recourse_ loans in Finland only 6.6% were written-off.

Table 1: FINLAND: Banking Groups Total Exposure as of 31 Dec 1992.

|Sector|Total<br>exposures<br>FM bn|%|Non-<br>performing<br>**assut**<br>FM bn|%|Write-offs on<br>**loansand**<br>**guntees**<br>FM bn||
|---|---|---|---|---|---|---|
|Corporate|268|45.1|<br>32|58.9|<br>17|71.8|
|Manufacturing|89|14.9|<br>4|7.5|2|8.8|
|Construction|29|_5.0_|6|10.1|<br>3|11.8|
|Trade, restaurants, hotel|<br>58|9.7|7|13.4|<br>3<br>|14.2|
|Real estate business|34|5.7|9|16.4|<br>5|20.5|
|Other|58|9.8|6|_11.5_|<br>4|16.5|
|Households|192|32.3|<br>12|21.1|<br>1|6.6|
|Other domestic 1/|57|9.5|3|6.1|2|10.6|
|Foreign|78|13.1|<br>8|13.9|<br>2|11.0|
|All sectors|595|100.0|<br>55|100.0|<br>22|100.0|
|**I/**Includes**financial institutions,**g<br>Source:**Banlk**of Finland|eneral govem|nment**and n**|**on-proftt intiti**|**ons.**|||

# Restructuring Vehides, Transparency, and Asset Disposition

In addition to bank mergers and closures, supervisory authorities of many countries have followed a "good bank-bad bank" approach to solve the solvency problems of distressed financial institutions. They have created asset management companies to dispose of problem assets in the least disruptive way possible. A comparative analysis of the financial cost, corporate governance, transparency and effectiveness of real estate asset disposal policies of these different asset management will be very important for future reference. The most sgnificant asset management companies for which data may be accessible for evaluation are: