Supervision must be improved to insure that proper risk management techniques are put in place and followed. Previous practices where banks, or those to whom banks made loans, loaded up on short-term hard currency denominated liabilities must be curbed.
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.