features although the current crisis is unique in terms of it extent and complexity, it is not difficult to see parallels to other, previous crises. uncontrolled and careless lending in an economic boom is a common feature in the history of bank crisises. this is not the first time we have seen inadequate risk management. another interesting feature is the attempt to circumvent regulations in both past crises and the present crisis. in sweden, the " grey " credit market appeared in the 1980s in an attempt to get round the credit regulations. the latest wave of securitisation of credit portfolios at international banks was driven in part by a desire to avoid costly capital adequacy requirements. the fact that loans in both cases were partly offered alongside the ordinary banking market in what is now called " the shadow banking system " concealed the real extent and location of the risks. why all these crises? so why do such financial crises arise? the root of most financial crises can be found in the imbalance between assets and funding. the simplest way to illustrate this is to look at a fictitious bank ’ s balance sheet. on the asset side there is lending to companies and households. these are assets that cannot be sold quickly without a substantial discount. in other words, they are illiquid. the bank ’ s funding on the other hand largely consists of deposits from the general public and short - term borrowing on the interbank and securities markets. their funding is thus very liquid. in normal circumstances this is not a problem, as we do not expect all depositors and other lenders to withdraw their money or their funding at the same time. however, this transformation of illiquid lending into liquid funds in accounts makes the banks dependent on the confidence of the funders in the bank's ability to meet its obligations. suspicions that the bank has financial problems could very quickly lead to a bank run. at the same time, problems that arise in one bank can easily spread to other banks. this contagion can occur in different ways. firstly, there can be a direct contagion through the exposures the banks have to one another in the payment systems and in connection with foreign exchange and securities trading. serious chain effects can arise if the customers of a bank that is experiencing problems have their funds tied up at the bank as this makes it difficult for them to make payments to other households and companies. this can lead to liquidity problems that in turn may give rise to loan losses and

- called commercial papers on the money market. when the property market folded, it was also a financial company, nyckeln, which in september 1990 was the first to throw in the towel when it could not renew its funding. other financial companies then followed suit. many of the financial companies were owned by the banks. and the banks were tied by both formal and informal commitments to these finance companies. the fact that a large part of the banks'exposures to the property sector were indirect in this way concealed the real extent of the banks'loan losses for a long time. when the losses of the finance companies subsequently appeared on the balance sheets of the banks in 1991, it became clear that the banks also had serious problems. the bank crisis had become a reality. many of us remember the consequences for the real economy. global imbalances laid the foundations for the current crisis if we now move on to the current global financial crisis we can see that there are both similarities and differences compared to the swedish bank crisis of the 1990s. the circumstances that formed the background to the outbreak of the current crisis in the summer of 2007 included the considerable global imbalances that had developed, with an enduring savings surplus in some countries and deficits in others. the surplus was invested on the global financial markets and the substantial capital flows there helped to push down interest rates. as a result, demand and prices on many asset markets around the world increased explosively and there was a general fall in the premiums for credit risk. the explosion in asset prices was fuelled by a rapid expansion in credit. money was lent more carelessly than previously. housing bubbles developed in several parts of the world. in the usa, the development of such bubbles was reinforced by the inadequate regulation of the mortgage market and a political agenda that aimed to promote house ownership among people on low incomes. the search for yield drove investors to borrow more in order to achieve greater leverage in their investments. financial innovations also helped to drive this development. a steady flow of new and increasingly complex instruments were created to satisfy the demand for investments with a higher yield. at many banks around the world, although not at swedish banks to the same extent, it became common to " securitise " different types of credit. previously, the banks has specialised in developing long - term customer relations and in continuously evaluating and monitoring credit risk. now the banks simply lifted some of their loans out of their balance sheets, repackaged them to form various securities and