Publication Code: BM1
by Pakorn Vichyanond and Yos Vajragupta
The 1997 financial crisis in Thailand was largely due to mismanagement of financial liberalization. Policy consistency and readiness of financial institutions as well as their regulators prove to be extremely essential or prerequisites before any change is to be introduced. After the crisis, the authorities were fairly successful in segregating viable financial institutions from unviable ones, improving supervision, upgrading asset classification and provisioning, encouraging mergers and acquisitions, allowing more foreign participation, and recapitalization. In addition, prudent macroeconomic policy was undertaken despite the economic downturn and social outcry. All these efforts resulted in greater foreign investors’ confidence and exchange rate stability. Nevertheless, to cope well with future dynamism in global financial markets, better regulations and supervision are equally important and needed as development of financial institutions’ human resources and good corporate governance. In addition, local capital markets as well as private business corporations, especially the SME, should not be neglected.
February 2000