The history of banking around the world has been punctuated by frequent systemic crises. Not all crises are the same with distinct roles being played at different times by mismanagement, government interference and macroeconomic shocks. This review draws on experience from developing countries as well as advanced economies. It identifies common features of crises in recent decades, describes how costly they have been (especially in developing countries) in terms of fiscal burden and impact on macroeconomic growth. It proceeds to outline the conceptual issues identified by theoreticians and considers appropriate policy responses. A lull in the new millennium led to optimism that banking crises might be a thing of the past, but the events of recent months have shown such optimism to be unwarranted.
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