Introduction

Abstract

Crises are costly. They not only impose losses on investors, but they depress output and employment. They wreck the public finances. After a financial crisis, it takes years for an economy to recover to its former peak output level and it may take longer still to restore its trend rate of growth. In some cases, crises leave a permanent scar — the crisis permanently reduces the level of GDP. The total cost of a crisis can therefore amount to a very high proportion of GDP (BCBS 2010a).