financial crisis

Recognition evidence

Record the evidence and assessment rule supporting or challenging the crisis designation.

1. Which financing, payment, intermediation or settlement functions are materially impaired, and for whom? definition
2. What observations distinguish this episode from ordinary volatility, an isolated failure or a recession without financial dysfunction? boundary
3. Who designated the episode a crisis, using what evidence and criteria, and which assessments disagree? provenance

System and time perimeter

Record included jurisdictions, markets and institutions together with provisional onset and episode-linkage decisions.

1. Which jurisdictions, currencies, markets, institutions and infrastructures belong inside the affected perimeter, and why? boundary
2. What evidence dates the onset and distinguishes continuation, recurrence and a separate crisis episode? boundary

Cash and collateral gap

Record obligations relative to accessible cash, refinancing and collateral under stated stress conditions.

1. What obligations fall due by horizon and currency, including withdrawals, margin calls and debt maturities? measurement
2. How much cash or funding is actually accessible after collateral haircuts, encumbrance and transfer restrictions? measurement

Loss-bearing capacity

Record solvency assessments with their valuation assumptions, uncertainty and dependency on external support.

1. What recognised, estimated and contingent losses threaten equity, fiscal capacity or other loss-absorbing resources? measurement
2. Which valuation, recovery and funding assumptions determine whether the problem is assessed as illiquidity, insolvency or both? definition
3. Which balance-sheet figures are independently verified, delayed, disputed or unavailable? provenance

Exposure and funding pathways

Record direct and indirect transmission links, separating observed propagation from hypothetical exposure.

1. Through which counterparty exposures, funding dependencies, common asset holdings or infrastructures can distress propagate? measurement
2. What evidence distinguishes transmission from independent reactions to a shared shock? provenance

Run and loss spirals

Record supported feedback hypotheses involving withdrawals, forced sales, collateral, currencies, sovereigns or credit contraction.

1. Which feedbacks are observed or suspected, such as withdrawals forcing asset sales or currency depreciation increasing foreign-currency debt burdens? definition
2. Which indicators show whether each proposed feedback is strengthening, weakening or unsupported? measurement
3. Where could an authorised intervention interrupt a feedback, and what displaced stress might it create? action

Impairment severity

Record severity using contextualised indicators of financial access, reliability and loss.

1. How far have payment completion, deposit access, market liquidity, refinancing and credit availability deteriorated against stated baselines? measurement
2. Which households, firms, public bodies or regions bear the disruption, and which consequences can be attributed to the crisis with reasonable confidence? measurement

Durable function restoration

Distinguish easing symptoms from restored financial functions and resolved underlying vulnerabilities.

1. Which impaired functions have recovered, for how long, and with what remaining restrictions or emergency support? measurement
2. What evidence would justify changing the phase to recovery or declaring the episode ended? boundary
3. Which unresolved funding needs, losses or support withdrawals could trigger renewed stress? measurement

Authorised response options

Record candidate instruments, responsible actors, eligibility conditions and practical constraints.

1. Which response options address the identified liquidity, solvency, market-function or debt-service problem, and under what assumptions? action
2. Which actor has authority and operational capacity to implement each option, subject to what legal, collateral, currency or fiscal constraints? action
3. What evidence or approval must the agent obtain before recommending, escalating or executing any response-related action? action

Response consequences and review

Record expected and observed consequences, including contingent public exposure and dependence on intervention.

1. How would each option allocate losses and risks among shareholders, creditors, depositors, taxpayers and other affected parties? action
2. What indicators and review dates would trigger continuation, redesign or withdrawal, and how would renewed disruption be detected? action

Kinds and varieties

Reported by the breadth pass; each item needs checking against its source before it becomes normative.

• Systemic banking crisis (runs, wholesale funding collapse, or widespread bank insolvency)
• Currency or balance-of-payments crisis (speculative attack, forced devaluation, reserve haemorrhage)
• Sovereign debt crisis (external or domestic default, restructuring, or near-default under market exclusion)
• Sudden-stop / capital-account crisis (abrupt reversal of foreign financing)
• Asset-price crash centred on equities or real estate
• Wholesale-funding or shadow-banking run (non-deposit money-market and repo distress)
• Twin or triple crisis (banking combined with currency and/or sovereign distress)
• Inflation crisis (Reinhart-Rogoff dating class; treated by others as a monetary-regime failure rather than a financial-system event)

1. Which of these kinds and varieties hold for the sense of financial crisis this model covers, and on what evidence? provenance

Identifiers and schemes

Reported by the breadth pass; each item needs checking against its source before it becomes normative.

• Wikidata - Q1134604 - Item 'financial crisis'; broader 'economic crisis' is a neighbour, not this item.
• JEL classification (AEA) - G01 - Financial Crises; related codes G21 (banks), G15 (international financial markets), F32/F34 (current-account and sovereign debt) sit nearby.
• Library of Congress Subject Headings - Financial crises - Authorized heading is plural; narrower headings include Bank failures, Currency crises, Debts, Public, Stock market crashes.
• IMF Laeven-Valencia systemic banking crisis episodes - ISO 3166 country + start year (optionally end year) - Episode keys in the IMF database, not a legal identifier of the event itself.
• Reinhart-Rogoff crisis dates - country-year tagged by crisis type (banking, currency, sovereign external/domestic, inflation, stock-market crash) - Historical chronology used throughout empirical macro; independent of the IMF banking-crisis list.

1. Which of these identifiers and schemes hold for the sense of financial crisis this model covers, and on what evidence? provenance

Standards and regulation

Reported by the breadth pass; each item needs checking against its source before it becomes normative.

• Basel III capital, leverage and liquidity framework - Basel Committee on Banking Supervision (Bank for International Settlements)
• Key Attributes of Effective Resolution Regimes for Financial Institutions - Financial Stability Board
• Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) - United States Congress
• Bank Recovery and Resolution Directive 2014/59/EU and Single Resolution Mechanism Regulation (EU) No 806/2014 - European Union
• Deposit Guarantee Schemes Directive 2014/49/EU - European Union; Federal Deposit Insurance Act / FDICIA prompt corrective action (1991) - United States
• IMF Articles of Agreement, exceptional-access policy, and Financial Sector Assessment Program - International Monetary Fund
• IOSCO Objectives and Principles of Securities Regulation (stress, clearing, and short-selling aspects) - International Organization of Securities Commissions
• ESRB/ECB macroprudential framework and systemic-risk warnings - European Systemic Risk Board and European Central Bank

1. Which of these standards and regulation hold for the sense of financial crisis this model covers, and on what evidence? provenance

Real-world use

Reported by the breadth pass; each item needs checking against its source before it becomes normative.

• Central banks and finance ministries use crisis dating and early-warning dashboards (credit-to-GDP gaps, property prices, wholesale spreads) to time countercyclical buffers and emergency liquidity.
• The IMF and World Bank treat identified episodes as the unit of FSAP surveillance, programme design, and exceptional-access lending.
• Resolution authorities (FDIC, SRB, national resolution bodies) apply living wills and bail-in once a systemic institution is failing or likely to fail.
• Empirical macroeconomics and economic history treat country-year crisis dummies as events that shift output, unemployment, public debt, and inequality.
• Markets price crisis risk in CDS, sovereign spreads, bank equity, and money-market premia (TED, LIBOR-OIS, EURIBOR-OIS).
• Stress tests at banks and CCPs are calibrated to historical crisis paths (2008 wholesale freeze, 1997-98 emerging-market sudden stops, 2010-12 euro-area sovereign loop).

1. Which of these real-world use hold for the sense of financial crisis this model covers, and on what evidence? provenance

Typical measurements

Reported by the breadth pass; each item needs checking against its source before it becomes normative.

• Peak-to-trough real GDP in a systemic banking crisis - about 5-10 in postwar advanced-economy episodes; often larger in emerging markets and in pre-1945 panics - percent
• Cumulative real output loss relative to pre-crisis trend (Laeven-Valencia style) - median on the order of 20-25; wide tails - percent of GDP
• Peak-to-trough real house prices in housing-centred banking crises - around 35 over roughly six years in the Reinhart-Rogoff historical average - percent
• Peak-to-trough real equity prices - around 50-60 over three to four years in historical banking crises - percent
• Rise in real public debt in the years after a banking crisis - Reinhart-Rogoff average near 80 over about three years; composition is recapitalisation plus automatic fiscal deterioration - percent
• Direct fiscal recapitalisation and guarantee cost - median roughly 5-12 of GDP; tail cases (e.g. Iceland, Ireland 2008) above 30 - percent of GDP
• Peak non-performing loans - often 10-30 of gross loans in systemic banking crises; higher in some emerging-market cases - percent
• Time from peak output to recovery of that peak - typically 2-6; some banking crises last a decade or more (Japan 1990s) - years

1. Which of these typical measurements hold for the sense of financial crisis this model covers, and on what evidence? provenance

Failure modes and hazards

Reported by the breadth pass; each item needs checking against its source before it becomes normative.

• Deposit or wholesale runs force fire sales, which mark down remaining assets and convert a liquidity problem into insolvency.
• Credit contraction after bank capital loss produces a recession or depression and hysteresis in employment and investment.
• Sovereign-bank doom loop: bank losses hit the fiscal accounts, sovereign spreads hit bank books, and both lose market access.
• Cross-border contagion through common creditors, trade, and correlated asset holdings.
• Policy failure in both directions: delayed last-resort lending and resolution, or blanket bailouts that entrench moral hazard.
• Currency mismatch and sudden stops in economies that borrow in foreign currency, producing corporate and bank insolvency after devaluation.
• Political and social instability, including loss of confidence in money, payments, and public institutions.
• Long-run misallocation if zombie lending or overly abrupt deleveraging follows the peak of the crisis.

1. Which of these failure modes and hazards hold for the sense of financial crisis this model covers, and on what evidence? provenance

Regional variation

Reported by the breadth pass; each item needs checking against its source before it becomes normative.

• Nineteenth-century United States usage is 'panic' (1873, 1893, 1907); later US policy language prefers 'financial crisis' or episode names (Savings and Loan, Global Financial Crisis).
• Euro-area 2010-12 is commonly framed as a sovereign-debt crisis even where the binding constraint was bank-sovereign feedback, not a classic external default.
• Latin America is often described in sudden-stop and 'debt crisis' language (1980s, Tequila 1994-95, Argentina 2001) rather than as a pure banking-run sequence.
• East and Southeast Asia 1997-98 is the regional template for IMF-centred capital-account and currency crises after liberalisation.
• Japan's 1990s episode is a slow non-performing-loan and asset-price crisis with few depositor runs, sometimes named as stagnation rather than crisis.
• Official Chinese usage emphasises 'preventing systemic financial risk' (防范系统性金融风险) more than declaring a 'crisis'.
• Emerging-market crises more often combine currency mismatch and sudden stops; advanced-economy crises since 1980 more often combine housing, banks, and wholesale funding.

1. Which of these regional variation hold for the sense of financial crisis this model covers, and on what evidence? provenance

Neighbouring kinds and how to tell them apart

Reported by the breadth pass; each item needs checking against its source before it becomes normative.

• Recession (NBER-style contraction) - A recession is a sustained fall in real activity; a financial crisis is a break in intermediation. Recessions occur without systemic financial failure (many oil-shock and pandemic demand contractions); financial crises usually cause recessions but are identified by runs, market freezes, or widespread financial insolvency, not by GDP alone.
• Bear market or market correction - Equity declines of 10-20 percent, or even a crash confined to listed prices, are not a financial crisis unless credit supply, bank solvency, or funding markets fail with them.
• Flash crash / microstructure freeze - Minutes-to-hours liquidity evaporation in an electronic market without lasting impairment of banks or credit is a market-structure event, not a financial crisis.
• Idiosyncratic bank or firm failure - Failure of one institution (even a large one) is a crisis only if it produces system-wide runs, fire-sale externalities, or a halt in credit; that is the Laeven-Valencia systemic threshold.
• Currency devaluation or regime change without financial freeze - A controlled or even large depreciation is a currency crisis in some dating schemes only when it is sharp and costly; it is a financial crisis only if it bankrupts leveraged balance sheets or stops intermediation.
• Sovereign default - Default can occur with a still-functioning private financial system; it becomes (or joins) a financial crisis when banks are large holders of the sovereign, or when default triggers a domestic payments and credit collapse.
• Depression - Depression names a deep, prolonged real contraction; a financial crisis is a financial-system event that can cause a depression but is not defined by the depth of GDP loss.
• Hyperinflation or monetary-regime collapse - Loss of the unit of account can destroy finance, but many financial crises occur at low inflation; inflation crises in Reinhart-Rogoff dating are a separate class unless they also break banks and credit.

1. Which of these neighbouring kinds and how to tell them apart hold for the sense of financial crisis this model covers, and on what evidence? provenance