This weakened lenders’ incentives to conduct prudent screening and constant monitoring. The resulting decline in underwriting standards and lending oversight fuelled excessive credit growth starting in the second half of the 1990s. At the same time, it created the conditions for its reversal. BIS Review 51/2009  1  The credit boom was exacerbated by three multipliers.
First, incentives: ill-designed compensation schemes for loan managers and traders reinforced the shortening of their time horizons. Second, complexity: increasingly complicated and opaque financial instruments made it difficult for holders of securities to assess the quality of the underlying investments.