Countries that choose to follow this simple rule may reduce their vulnerability to financial crises. At a minimum this framework can highlight signs of vulnerability. For example, Korea s short-term debts, including those of Korean banks, were more than three times its foreign exchange reserves in December of 1996. An external balance-sheet rule could generate substantial benefits for the international community as well.
If followed, it would likely limit the size of future international rescue packages, since the size BIS Review 47/1999  4  of such packages is often related to the size of a country s short-term liabilities less its reserves. In applying any simple rule, it is important to anticipate endeavours to get around it.