In short, the deteriorating condition of borrowers hurt the banking system, which increased economic harm to the rest of these countries’ economies. Two other features of these countries’ financial systems have compounded the problems caused by poor lending practices and inadequate supervision. First, standards for the transparency and disclosure of private financial information were extremely lax.
It was difficult for creditors, foreign or domestic, to distinguish good risks from bad, and this caused them to both grant and, later, withdraw credit from borrowers within these countries without full knowledge of borrowers’ creditworthiness. This latter reaction exacerbated the crisis for the businesses and citizens of these countries.