The Asian financial crisis involved several mutually reinforcing events, starting with the devaluation of the Thai baht in July 1997, and followed by devaluations of other currencies, the attack on the Hong Kong dollar in October 1997, a rapid withdrawal of foreign private capital, bank runs, sovereign downgrades, and a dramatic decline in real economic activity.3 A combination of financial system and corporate sector vulnerabilities and weaknesses contributed to the crises and magnified the negative impact of exchange rate devaluations and foreign capital withdrawals on financial institutions. This section highlights some of these vulnerabilities, which were present in all the crisis countries, albeit differing in specific aspects.

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