ompetition and deregulation. Both are seen by some as threats and by others as opportunities. There have also been certain events that have served as harbingers of deeper problems, such as the collapse of Britain's Barings Bank and the French bank Crédit Lyonnais. The Banco di Napoli has also sought assistance from the Italian government to remain open. The Barings collapse demonstrates how even the actions of one broker can create havoc and how inadequate both internal and external controls may be.
One of the problems with deregulation has been that the bank regulations left in place are often ignored. Bank regulators have been accused of being complacent and of allowing massive problems to develop in the industry, and this pattern has been seen in country after country. In Great Britain, an official with the bank of England resigned when it was noted that the Bank had failed to see the Barings disaster forming. In France, regulators were chastised for allowing the problems of Crédit Lyonnais to grow. The finance minster of Japan was castigated for allowing that country's banking problems to increase. A number of banks crashed in the 1980s because interest rates in the economies stayed relatively low while their economies grew steadily. Deregulation at the same time removed many of the rules that had up to then limited competition within the industry. The result was a massive credit-driven boom in property and share prices that encouraged bankers to increase business, but when interest rates rose sharply in 1989, the bubble burst, borrowers started to default in large numbers, and many banks in different countries were submerged in bad debts ("Coping with the Ups and Downs" 3-4).
In the United States and Great Britain, bankers had made numerous loans on property with the hope that the fat margins on such risky investments would offset declining profits in the more traditional corporate-lending business. Mutual fund...