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Asia ’97: The financial crisis that left its mark for good


Piyush Gupta recalls the Asian financial crisis clearly. The chief executive of DBS was at Citi at the time, and when riots broke out in Indonesia, the country head did not want to go back to Jakarta with his family. So Gupta put his hand up to go.

“For the next year, I had a conference room which was like a war room,” he says. “Every morning, when we got there, we would map out: where is the civil unrest in the city? Is the branch shut? Can we move cash in and out?

“It was not like being a banker. It was like being a platoon commander.”

Don Hanna, then Asia economist for Goldman Sachs and now at CIMB, recalls it well too. He was in Jakarta the night before the race riots broke out and had dinner with an IMF representative whose wife had just arrived. 

“I was telling them: ‘Don’t worry, this is a lovely safe place,’” he says. “A day and a half later they were being evacuated.

“It was not the finest moment for forecasting,” he says, but he does not treat the moment lightly. “That day sticks out for the loss of life and tragedy. It was a dismal moment for the country generally.”

Nestor Tan left BZW in London for what is now BDO Unibank, and where he is now chief executive, in May 1997. 

“I started here in June, and by July the crisis came,” he says in Manila at the bank’s head office. “So I brought the crisis with me. I was four weeks into my job and it happened.”

One banker recalls flying to Bangkok to work on a bank restructuring and being forced to go in through a back entrance, starting work at midnight because nobody was willing to admit publicly that there was a problem. Another remembers the sense of denial in Seoul, in the midst of an IMF bailout, where the banks and public offices continued to turn off the air conditioning at 5pm, crisis or no crisis, because that was what they had always done. 

The Asian financial crisis left a mark on everyone who worked through it.

If you had to pick a day the crisis started, it would be July 2, 1997, the day the Thai baht devalued. Hanna recalls it well since he was on a plane flying to San Francisco. When he boarded the plane, the baht was at Bt25 to the dollar, when he got off it was Bt29 and would not bottom out until it hit Bt56 six months later. 

At first it seemed localized. 


Don Hanna,

“The contagion occurred really over the course of the summer, and a lot of it hinged around two sets of things,” says Hanna. 

The previous year export growth in Asia relative to GDP had decelerated sharply: “And that became problematic for Asia because of the large current account deficits that were being financed on the expectation that export growth was going to be strong.” 

As exports slowed, bankers began to wonder if they were goíing to be repaid. Confidence drained and the stock market dropped by 75%; by August Thailand was accepting a rescue package from the IMF.

Still, it wasn’t until later in the year, around November, that Indonesia began to be swept up. 

“That was a function of a naïve intervention by the IMF,” says Hanna. 

The IMF asked the authorities to close a number of banks and companies widely known to be insolvent. 

“But it did it without providing a generalized guarantee to bank deposits in the system,” says Hanna. “And because depositors couldn’t tell healthy banks from unhealthy ones, it…

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