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The term “financial crisis” has long been associated with dramas such as bank runs and asset-price crashes. Charles Kindleberger’s classic books “The World in Depression, 1929-1939” and “Manias, Panics and Crashes,” and my own work with Kenneth Rogoff, “This Time Is Different,” document scores of these episodes. In recent years, the term “Lehman moment” has stood out as a marker of the 2007-09 global financial crisis and even inspired a Broadway show.

However, some financial crises do not involve the drama of Lehman moments. Asset quality can deteriorate significantly as economic downturns persist, especially when firms and households are highly leveraged. Moreover, years of bank lending to unproductive private firms or state-owned enterprises (the latter is not uncommon in some developing countries) take a cumulative toll on balance sheets.

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