As a consequence, funding sources dried up as fears of defaults rose dramatically. In an environment of weak financial systems, lax supervisory regimes, and vague assurances about depositor or creditor protections, the state of confidence so necessary to the functioning of any banking system was torn asunder. Bank runs occurred in several countries and reached crisis proportions in Indonesia. Uncertainty and retrenchment escalated.
BIS Review 38/1998  -2-  In short, the slowing in activity in Asia exposed the high fixed costs of a leveraged economy, especially one with fixed obligations in foreign currencies. Failures to make payments induced vicious cycles of contagious, ever rising, and reinforcing fears. It is quite difficult to anticipate such crises.