The need for an enhanced framework for crisis prevention and management  I do not need to remind you of the long list of financial crises emerging market economies have gone through in the last two decades. Against this background, the international community must, on the one hand, enhance crisis prevention and, on the other hand, design and implement better procedures for crisis resolution. BIS Review 62/2002  3  2.1. Authorities must reflect, in conjunction with the financial industry, on building up a suitable system of surveillance and crisis prevention. The objective of strengthening crisis prevention is shared by the private sector and by official community given the magnitude of potential losses; indeed, in some cases, restructuring costs for banking crises have reached more than 40 % of GDP. Building on international standards and codes is instrumental in establishing an appropriate institutional, supervisory and regulatory framework in the financial sectors of all market economies. The value of international standards is now widely recognised, insofar as they contribute to spreading international best practices and codes of good conduct, very closely linked to the globalisation process and the expansion of international capital flows. Indeed, the conduct of sound national economic and financial policies stands for a primary protection against potential financial contagion. Much has already been achieved with the design of more than seventy internationally agreed norms.

Therefore, we should define ex-ante the exceptional circumstances under which the international community is ready to go beyond the normal lending limits. These conditions should include external debt sustainability, appropriate adjustment policy measures and the perspective of a quick return to financial markets. I also believe that exceptional procedures should be put in place when IMF access limits are to be breached. 4  BIS Review 62/2002  Second, procedures should be settled in order to limit the costs implied by unavoidable suspensions of payments. Indeed, these procedures should support the necessary informal dialogue between debtors and creditors prior to payment suspension and avoid the drawbacks of freezing market processes. Some instruments could help to achieve a timely and orderly process. A co-operative standstill mechanism would help to achieve a more timely and orderly rescheduling or restructuring process. For example, commonly agreed Guidelines or Best practices by debtors and creditors under the aegis of the IMF could ensure that such standstills be implemented. In addition to the appropriate domestic adjustment policy, such Guidelines could cover rules regarding, inter alia, transparency towards creditors, reasonable offers to creditors, comparable treatment of all creditors, seniority for “new money”, and a limited duration of the standstill. Obviously, a more extensive inclusion of collective action clauses (CACs) in debt contracts can greatly facilitate the negotiation of debt restructuring, by promoting agreement among creditors. Industrialised countries could contribute to this strategy by including CACs in their foreign debt issues, a step already made by EU countries.