To conclude, it is difficult nowadays to isolate oneself totally from external shocks and sudden capital movements. But the authorities in emerging markets can render their economies less vulnerable by running sustainable fiscal policies and choosing a suitable exchange rate regime. To build a sounder banking sector might be more challenging.
Again it is very difficult to isolate the banking sector from capital movements, but the authorities can demand large capital requirements. Authorities could also supervise the currency mismatches in the banking sector properly. More capital and less foreign currency liabilities might render the economies less vulnerable to sudden capital movements and crises. 2  BIS Review 72/2004