Gives and overview of the East Asian financial crisis, focusing on the seven countries most directly involved, and the underlying reasons for its magnitude. Examines the 1991‐1999 economic growth rates, inflation rates and current account positions in the area and asserts that the deterioration of macroeconomic fundamentals was insufficient to explain it. Relates a number of external factors in the crisis to some research models and argues that the poor regulation and control of the banking system, coupled with an inflow of foreign investment, which investors wrongly believed to be government guaranteed, caused a “bubble” in share and property prices. Describes the collapse of companies, currency values and share/property prices which followed, exacerbated by a panicky withdrawal of foreign funds, speculative activity and government policy errors. Lists the objectives of and instruments used by the IMF programme and asks if it was too harsh e.g. on bank closures. Considers the lessons of the crisis and its implications for the Basle capital adequacy rules and the imposition of capital controls.