Just as a strong financial system promotes growth, adverse financial conditions - for example, a weak banking system grappling with nonperforming loans and insufficient capital, or firms and households whose creditworthiness has eroded because of high leverage, poor income prospects, and assets of declining value - may prevent an economy from realizing its potential.
A striking contemporary case is that of Japan, where the financial problems of banks and corporations have contributed substantially to a decade of subpar growth. Likewise, the severity of the Great Depression of the 1930s was greatly increased by the near-collapse of banking and financial systems in a number of major countries, including the United States.