Reforming and liberalizing financial markets began in the wake of the country’s 1991 balance-of payments crisis. The thrust of these reforms was to promote a diversified, efficient and competitive financial system, with the ultimate objective of improving the allocation of resources through operational flexibility, improved financial viability, and institutional strengthening. The pace of reform was, however, slower than those in product markets, partly because the introduction of stricte prudential controls on banks revealed significant problems in asset portfolios. Prior to the reforms state-owned banks controlled 90% of bank assets—compared with approximately 10% at end-2005— and channeled an extremely high proportion of funds.
