Unfortunately, a combination of poor banking practice, weak supervision and a number of macroeconomic shocks can destabilize a banking system. The solutions might include bank supervision at the best international levels, greater transparency, and, perhaps, some interference with capital flows.
When a banking system becomes insolvent, however, there is no substitute for stripping away the bad assets in order to allow banks to once again perform their special role in society. Who bears the costs and how to ensure market discipline may be the most important issues to be addressed in that solution.