Market discipline can also be used to control risk, by exposing BIS Review 71/1998  -4-  financial institutions to as much market discipline as possible and by limiting moral hazard problems. But even with all the preventive medicine in the world, the patient sometimes gets sick, and banks in Japan and a number of other countries surely are.
Finally, it will diminish the power of strategic defaulters who, until now, see no immediate consequences from failing to pay. A conservative estimate, based on a sample of 13,000 firms with loans that exceed one million euro, indicates that, on average, one in six companies appear to strategically default, while anecdotal evidence suggests that this value is significantly higher for smaller businesses and households.