Date Added: Jun 2010
The conventional view is that microeconomic reforms after the 1997 - 98 Asian financial crisis have greatly strengthened banking systems in Asia. Banks have become better capitalized, external exposures have been reduced and credit risk has been managed more effectively. But this conventional view does not take enough account of the macroeconomic background. A sharp rise in domestic savings, combined with the recent large-scale sterilized intervention and easy monetary policy, has led to very easy financing conditions for banks. Bank credit expanded. Banks have accumulated a large stock of government bonds.