Salman Syed Ali(^5) For example, Krugman (1999); Chang and Velasco (1999); Morris and Shin (1998);
and Chui, Gai and Haldane (2000).
(^6) For example, Diamond and Dybvig (1983); Brynat (1980); Von Thandden (1995);
Anderlini (1989); and Postlewaite and Vives (1987).
(^7) Caprio and Klingebiel (1996) report that out of 29 cases of bank insolvency in their
survey, poor supervision and regulation featured in 26 cases (see figure-3 of their
paper).
(^8) Various debt covenants defining priorities of different debts are some ways through
which a ‘run on clients’ can be dampened but they by themselves are insufficient.
Such problems occurred among international lenders during Latin American crisis
and solution was proposed by forming a consortium to negotiate rescheduling of
loans and payments with the sovereign borrowers (clients) rather than allowing the
individual creditors to work out their own negotiated deals with the defaulting states.
References
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