As we have argued previously, there is little doubt that there were growing problems in
each of the Asian crisis economies, that in a way could be understood as side effects of the
region=s very successes.2 Many of the problems had their origins in financial liberalization
policies introduced in each of the crisis economies in the late 1980s and early 1990s that led to a
very rapid expansion of the financial sector, and enthusiastic lending by foreign creditors. Entry
requirements into financial services were loosened, allowing new private banks to open. Banks
were given much greater leeway in their lending decisions, and stock and bond markets began to
grow and develop. Importantly, banks and financial institutions had new freedoms to raise funds
offshore. New institutions were developed, such as the Bangkok International Banking Facility
(BIBF) that were designed to offer new financial services and attract investment, and were
actively encouraged to borrow offshore to finance their activities. This combination led to a rapid
expansion in both offshore borrowing and domestic lending, with a resulting investment boom.