The second crisis occurred in banks founded after changes in the economic system that were not able to remain viable, because of either weak management and/or increased competition in the market as the transition period progressed. Croatia followed that pattern. The first banking crisis, the crisis of the old banks, as they were called, started with the beginning of the transition process (and even before it), and is even now ending with the sale of the rehabilitated state banks to foreign strategic investors. The costs of this crisis, brought about by the legacy of the past and as is too often forgotten, by the enormous consequences of the war, can be estimated at about 23% of GDP. These high costs are typical of countries caught up in a war, like Kuwait and Israel in parts of their histories. During the first half of 1998 the second banking crisis became visible in Croatia. The then government made a decision to rehabilitate two banks which represented about 7% of the total banks’ balance sheet. Bank rehabilitations are payed out of the budget. The Croatian National Bank required that bankruptcy proceedings be started in nine banks and four savings banks, while it withdrew the operating permit from one branch of a foreign bank, one bank and six savings banks. This has imposed high budgetary costs for the payment of insured savings deposits in banks in which bankruptcy proceedings have been started. The total costs of the second banking crisis could be estimated at about 4% of GDP.
SPEECH DATE:  17 June 2020  SPEAKER:  Deputy Governor Henry Ohlsson  VENUE:  riksbank.se  SVERIGES RIKSBANK SE-103 37 Stockholm (Brunkebergstorg 11) Tel +46 8 787 00 00 Fax +46 8 21 05 31 registratorn@riksbank.se www.riksbank.se  Monetary policy during the economic crisis* The economic crisis the world economy is now experiencing is the deepest for many decades. Both demand and supply have declined substantially around the world. Economic policy faces major challenges. Sweden, which is a small open economy, has been severely affected by the reduced economic activity in the world around us. Naturally, we have also been affected by how international economic policy to deal with the crisis has been formulated. I will in this speech highlight three challenges that monetary policy has faced during the spring. These challenges have by no means disappeared, we will continue to deal with them. The first challenge has been that the financial markets function less smoothly during severe economic crises. This has been an important base for the Riksbank's monetary policy during the spring. Monetary policy aims to attain the inflation target. A second challenge at present is that the inflation statistics are difficult to interpret. For instance, there are no prices for many goods and services because there is quite simply no economic activity on these markets. Monetary policy must also be forward looking. Under normal circumstances this means that monetary policy is formulated according to forecasts of future economic developments.