The crisis emerged from a backdrop of financial deregulation, which unleashed a wave of perilous credit operations and a subsequent lending frenzy.
The elimination of lending rate constraints led Norwegian banks to partake in high-risk activities, resulting in diminished household investments.
However, the situation worsened when oil prices plummeted in 1985, inducing a deficit and devaluation of the Norwegian krone, thereby triggering a recession as both public and private institutions consolidated their financial positions.
[1] Between 1988 and 1990, the crisis intensified as smaller banks succumbed to failure, prompting an interbank credit freeze and an upswing in lending rates.
As the latter half of the period approached, the Norwegian exchange rate gradually regained credibility, engendering hopes that the recessionary phase was nearing its end.