One of the causes was that the private construction of railways had been excessively boosted by the ample supply of capital during the expansion. The crisis hit those trading companies and banks that had been far too optimistic in their provision of loans. Stockholms Enskilda Bank, headed by A.O. Wallenberg, suffered the most when the public stormed the bank to withdraw their money. The finance minister of the time was forced to intervene and Stockholms Enskilda Bank and other problem banks were able to get liquidity assistance with the help of foreign loans. Lack of experience and underdeveloped risk culture paved the way for the crisis of the 1990s If we take a leap forward in history, then many of us probably remember the domestic financial crisis that began in the early 1990s. For a long period following World War II, the financial markets had been kept under very strict regulatory control by the Riksbank. However, the phase-out of the regulations began in the second half of the 1980s and culminated when the foreign exchange controls, which originally were part of the crisis regulations introduced during the war, were abolished in 1989. When the floodgates were opened there was no way to stop the rapid increase in the demand for loans, and there was no incentive to say no to loan applications. The risk culture at the banks was still underdeveloped. One consequence of this was that the credit risks on the overheated property market were underestimated and underpriced.
Jean-Claude Trichet: Recovery, reform and renewal – Europe’s economic challenge Speech by Mr Jean-Claude Trichet, President of the European Central Bank, at the conference “The ECB and Its Watchers” XII, Frankfurt am Main, 9 July 2010. *  *  *  Ladies and Gentlemen, It is a pleasure to be with you in this 12th edition of the ECB Watchers’ Conference. Today, I would like to consider where we are in the financial crisis and the economic recovery; to describe the emerging contours of the post-crisis order both in Europe and the wider world; and to reflect on what has been achieved by the global policy response to the crisis and what remains to be done. 1. Where do we currently stand in the crisis? We are now almost three years into the crisis. The development of the crisis was marked by a progressive collapse of confidence: a seizing up of markets, dramatic financial events impacting the global financial system, a sharp decline in trade and a freefall in economic activity in the industrial world. We can all feel relief that the collective international efforts to avert catastrophe in the winter of 2008/09 have been successful. But events over the past few months have made clear that it is still too early to declare the crisis over. And, just as they have done throughout the crisis, governments and central banks in Europe and around the globe continue to respond to shifting economic and financial circumstances with swift, decisive and effective action.