the resolution of the East Asian crisis: financial and corporate sector restructuring

The extraordinary turbulence in East Asia over the past 3 years has sparked awide- ranging debate on the causes of the crisis, lessons to be learned, and the desirable architecture of the global financial system. Among policy makers, international financial institutions and private organizations, and in academic circles, views are converging on the causes of the East Asian crisis: The crisis was the result of interactions between massive capital inflows and outflows and weak domestic institutions, notably in the financial sector, in emerging market economies. As a result, discussions are proceeding on how the international financial system and domestic policy frameworks and institutions can be improved to maximize the benefits of, and reduce the risks posed by, global economic and financial integration. While issues on the international financial architecture primarily involve ways and means to improve the international economic and financial system, they also call for the strength- eningofemerging markets'domestic institutions: (1) Financial markets must improve transparency and supervision and do abetter job of self-regulation and risk management. (2) Authorities must develop effective frameworks for resolving bank and corporate insolvencies at minimum costs and without creating moral hazards. (3) Corporate governance must be improved through the adoption of international standards and best practices for accounting, auditing and disclosure. Key focus has been on financial and corporate sector improvements. The EastAsian crisis adversely impacted banks and corporations in the affected economies. Most banks are still heavily burdened with large nonperforming loans (NPLs), many of which may ultimately have a relatively low recovery rate.download