Involving private creditors in the resolution of debt servicing difficulties, and ensuring that they are exposed to their fair share of potential losses, are therefore important steps in creating an appropriate set of market disciplines on both lenders and borrowers. 5  BIS Review 81/1999  However, it is equally important that this process does not lead to disorderly debt defaults.
Defaults by debtors certainly help to instil market discipline, but they also risk significant disruption to financial markets and tend to impose higher costs on borrowers and lenders, as well as third parties, than might have been the case had the debt servicing difficulties been resolved in a more orderly manner.