Addressing an IBA meet on trends in international banking here on Wednesday, Fish said that the turmoil occurred even as the region has the highest domestic savings rate in the world. The rate ranges between 35 and 45 per cent of GDP.

Obviously, banks and other financial institutions did not pay requisite attention to the operating risk of borrowers, pushing the region into financial crisis, said Fish, who is also chief executive officer of Stanchart Bank, Indian operations.

Besides, sound principles of economic finance and banking were flouted, short term money was used to sponsor long term assets, cheap dollar loans were allowed to create domestic currency assets.

It is surprising that banks with all the sophisticated risk management systems could not seethe signs of trouble early enough. The Asian crisis and its impact elsewhere will force changes in the way banks and institutions conduct their international business, Fish said. Now, the lending decisions will be based much more on the merits of individual loans rather than on the preservation and development of relationships. Secondly, banks will be wary of being overexposed to the highly speculative and relatively illiquid, property and real estate sectors.

Besides, banks will create safety nets in the form of provisioning on a larger scale in riskier markets. Banks will also pay much greater attention to contain currency and maturity mismatches in their balance sheet, he said.

Asian crisis has also completely wiped out the myth that unbridled capitalism is panacea for all ills. Already, the western nations are beginning to have conferences on what is called `the third way' trying to find economic and social systems somewhere between socialism and capitalism, Fish said at the conference.