Historically a number of housing market busts have been associated with crises in the banking sector, as banks traditionally have held the largest part of the mortgage  5  See Helbling and Terrones (2003) and Allen and Gale (2000). 6  See Bordo and Jeanne (2002) for the evidence mentioned in this paragraph. Similar conclusions are reached by Detken and Smets (2004).
7  See Slacalek (2006) as well as Case, Quigley and Shiller (2005) and Skudelny (2008). 8  See Slacalek (2006). 4  BIS Review 85/2008  loans on their balance sheets. An increase in delinquency rates, triggered by house price declines and a coinciding economic slump reduce the capital buffers of banks with adverse effects on credit expansion and the intermediation process.