As a result, capital was not always channelled into its most productive use, and in various countries this fostered an unsustainable asset price increase that led to high private-sector debt and excess domestic demand; the housing markets in several advanced economies are a prominent example. These undesirable developments were further encouraged by loopholes and weaknesses in the regulatory framework.
Eventually, the underlying imbalances erupted and came to the surface; we still have to deal with those consequences. The deficiencies of the financial system that reinforced the unhealthy development were many and encompassed the microeconomic as well as the macroeconomic level.