It is also important to note that for countries operating on pegged exchange rates, a panic
by domestic investors can also deplete foreign exchange reserves, and thereby precipitate a
financial crisis. For example, holders of sight deposits in the banking system, or domestic holders
of treasury bills, might decide suddenly to convert their domestic assets into foreign exchange,
thereby draining the foreign exchange reserves at the central bank (such, after all, is the classic
framework for understanding a balance of payments crisis).