In this chapter, I address the three countries in the sample that were democracies. At some point in time each of these countries had a chief executive without crony links to bankers, who was forced to operate with a signaler/signalers with regulatory preferences that were different from his own thanks to the checks on his power. On each occasion there is evidence of serious problems in communication that went unresolved, resulting in lax regulation. This, of course, is in line with the predictions of the theory.

THAILAND

Thailand proved to be an extremely lax regulator of banks in the wake of capital flow liberalization in the early 1990s. Prior to liberalization, however, Thailand's central bank was not considered to be an extremely lax regulator. To place Thailand's post-liberalization regulatory performance in context, I begin with a background section that addresses the political determinants of bank regulation in Thailand from the 1960s to liberalization. In Section 4.2, I describe the political environment in which Chuan Leekpai, the Thai prime minister for the three years following capital flow liberalization, operated. In Section 4.3, I describe Chuan's inner circle of banking advisors. In Section 4.4, I describe Thailand's weak record of enforcing bank regulations during Chuan's term, and Section 4.5 addresses the regulatory performance of Chuan's successors.

Background: Bank Regulatory Governance in Thailand Before 1992

In the three decades prior to the liberalization of capital flows in 1992–93, Thailand was predominantly governed by a succession of authoritarian or semi-authoritarian regimes, that is, regimes with very few checks on the chief executive's power.