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There is a natural inclination to think of financial crises as rare events. Yet banking crises have become increasingly common—especially in the developing world. Lindgren et al.(1996) have reported that over the 1980–96 period at least two-thirds of IMF member countries experienced significant banking sector problems. In many regions, almost every country has experienced at least one serious bout of banking trouble. Moreover, the incidence of banking crises in the 1980s and 1990s has been significantly higher than in the 1970s, and much higher than in the more tranquil period of the 1950s and 1960s. Honohan (1996) goes even further, arguing that