Preparing for the Next Financial Crisis

Notions 19

1.5.1.2 Consequences of moral hazard for nancial stability

Moral hazard can be viewed as a factor increasing the costs of banking crises, or

even as a factor of banking crises.

The rst approach can be found in Honohan and Klingebiel (2003). They

study 40 cases of banking crises in 34 countries (including 25 emerging or de-

veloping economies) over the period 2000–2004. They estimate the direct scal

cost of an accommodating approach of those crises, possibly involving blanket

guarantees of deposits, an unlimited liquidity support and repeated recapitali-

zations as well as debtors’ bailouts and regulatory forbearance (i.e. the practice

consisting in suspending, implicitly or explicitly, the implementation of regu-

lations, which wou ...