Here, Eichengreen recognises that there are characteristics  BIS Review 82/1999  2  of financial markets that make them prone to occasional distress, to overshooting and to herd behaviour. The banking system will often be the point at which stresses associated with this behaviour come to the surface.
So, however positively we view markets, history and the structure of financial markets warns us to expect periodic crises. •  This instability provides a compelling argument for erecting a financial safety net, despite the moral hazard that may result. Eichengreen argues that history shows the need for deposit insurance and a lender of last resort to contain systemic risks to the financial market.