This correction of previous misalignments caused material damage to the financial system, including the failure and hence closure of a number of financial institutions and a significant fall in equity market participation for several years following.
A common element in most of these mentioned financial crises has been the rapid expansion in the supply of bank credit which, at least with the benefit of hindsight, was priced too cheaply (i.e., the risks were under-priced). Borio (2005) 4 emphasises credit supply by highlighting the role of `financial imbalances' in causing crises.