Moreover, the mark-to-market completed by mark to model of a wide range of assets and liabilities has also contributed to this widespread focus on immediate financial performances. This focus on short-term performance can translate into additional volatility in the price discovery process: indeed, the shorter the investment horizon of market participants, the larger the impact on prices of any new information. Mimetic behaviour is by no means a new phenomenon on financial markets. However, technological developments on markets may have gradually reinforced this type of behaviour. The spread of benchmarking, which allows fund managers and clients to measure performance against that of other funds, together with the growing competition within the sector, appears to have favoured such “herd behaviour”. Some operators have come to the conclusion that it is better to be wrong along with everybody else, rather than take the risk of being right alone. A striking example of rational mimetic behaviour is the influence that hedge funds enjoyed, a few years ago, as "opinion leaders" and trend makers. The second set of factors relates to new market techniques or financial engineering devices. Here are a few examples of some of these mechanisms: •  The inclusion of contingent or trigger clauses in loan and bond contracts. These clauses provide creditors with a form of insurance since the level of interest rate paid by debtors increases when specific trigger events occurs (typically the downgrading of the debtor by rating agencies). These clauses were designed to help borrowers access financing at lower rates.
Cases of financial turmoil in emerging countries, which are usually due primarily to inappropriate domestic policies, show that there is room for improving the timely identification and correction of vulnerabilities by International Financial Institutions. In particular, a key point is to improve the analysis of debt sustainability in order to have a more forward-looking assessment of possible cases of insolvency. We can only praise the ongoing work by the IMF on this matter. Unfortunately, enhancing warning signals will probably not be sufficient to protect us against financial crisis. 2.2. Designing effective procedures for handling international financial crisis represents another challenge  First, there is a need for clarifying the financing policy of the IMF, as acknowledged by the G 7 and the recent IMFC communique. Greater discipline in the provision of official finance is key to ensure a more timely involvement of the private sector in crisis resolution (PSI), and to provide strong incentives for debtors and creditors to start debt negotiations timely and appropriately. By doing so, the international community will benefit from the so-called « catalytic approach », that was at the core of crisis management in the 1980s and proved quite successful, and that was recently restated by the international community. A precondition for an orderly crisis management relies upon more predictable decision-making process regarding the use of Fund’s resources. In that regard, the presumption of clear access limits to Fund financing is key.