Financial crises can be worse for economies if the quality of institutions declines during the crisis. Policy responses can help, but their success depends on the institutional environment. A study using data from many countries found that when institutional quality weakens during a banking crisis, there are additional long-lasting economic losses. This is not as severe during debt and currency crises. In less financially open economies, the impact of institutional deterioration during a banking crisis is more significant, highlighting the importance of strengthening institutions for recovery.