Introduction
Economic crisis can be defined as an exceptionally sharp decline in economic activity. In 1990’s the world economy was hit by a series of deep crises. Economic crises hit first the Nordic countries Finland and Sweden. The same pattern has later been observed in other countries like Mexico, Russia, Brazil, etc. This economic crises lead to a drastic change in the economic policies adopted by Sweden.
Causes
In the early 1980s the stage was set for deregulation. An early step was the abolition of the liquidity ratios for banks in 1983. Interest ceilings were lifted in the 1985, and finally the lending ceilings for banks were also removed in 1985. The main driving force behind the deregulation was the rapid development of financial markets.

Deregulation also opened up new opportunities for banks which have been in high regulations till then. The active financial markets made the regulations increasingly inefficient. Banks expanded their activities such as leasing, factoring and credit cards into direct lending which pushed them into higher risk markets. Finance companies were partly funded by banks and also by bank guaranteed company investment certificates (marknadsbevis). All these factors led banks expose themselves to extra credit risk.

Foreign borrowing was mostly intermediated by the banking system. Lending in foreign currency increased from 27 per cent of total bank lending in 1985 to 47.5 percent in 1990. Private sector was also exposed to considerable exchange rate risk

Also in the 1980s, the Swedish economy was characterized by high taxes, high inflation rates, and a tight labour market; relatively attractive jobs within the multinational corporations (MNCs) were relocated from Swedish plants to foreign affiliates.

Crisis
There have not been any signs of impending financial crisis in 1989. But there was strong recognition that