To illustrate, the successive failures of major Japanese financial institutions in 1997 and 1998 were not directly triggered by a major default. Instead, their undoing was a rapid loss of confidence in the market. Typically, as the soundness of a bank was questioned in the market, prices of its stocks and credit ratings started to fall.
As an example of what we’ve already achieved, take the key points of the reform framework already adopted at international level: “Basel III”, a far-reaching new global regulatory standard for bank capital adequacy and liquidity that was endorsed by the G20 at the end of 2010. Its objective, in brief, is to better equip banks for weathering future stress situations.