The Nordic Baltic financial stability authorities have in the recent days virtually convened to manage a hypothetical financial crisis in the Nordic Baltic region involving three fictitious financial institutions. The exercise had participation of close to 450 participants, representing authorities from Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden as well as relevant European Union authorities (EC, ECB, SRB and EBA). A staff member of the International Monetary Fund observed the simulation.
The exercise was designed in line with a classic crisis scenario where the fictitious banks went through three steps that are part of the traditional crisis management process: 1) normal business to recovery including liquidity provision, 2) recovery to resolution with authorities assuming control and 3) against the backdrop of resolution, a reversal of the restructured bank to more normal market conditions.
The purpose of the exercise was to test the authorities’ crisis management competences and ability to make coordinated decisions in an environment with a high level of uncertainty and under time pressure. In the coming weeks, the authorities would take note of the exercise and evaluate the lessons learnt. Against the back of possible learning points, participants would update crisis management playbooks with the purpose of further enhancing the crisis management framework in the Nordic Baltic region.
A preparation team under the Nordic Baltic Stability Group (NBSG), under the steer of the Resolution entity in Denmark - Finansiel Stabilitet, was formed in 2023 to prepare for the exercise. The group has been advised by Oliver Wyman in the preparation of the exercise. The NBSG consists of Ministries of Finance, Central Banks, Supervisory and Resolution Authorities in the eight Nordic and Baltic countries. The Nordic and Baltic countries have agreed in the context of the NBSG to conduct regular financial crisis simulation exercises.
More information available in website: Nordic Baltic Crisis Simulation Exercise, 2024 (fs.dk)