During the years prior to 2005, investment banks were making huge profits by issuing credit default swaps to guarantee the bonds issued by borrowers. They sold these swaps to other investors and made a good margin.
In the later years, as the economic situation becomes difficult and defaults on mortgages rises, the investment banks were saddled with swaps that they were not able to off-load to ther investors.
Some clever but dishonest banker conceived the idea of designing a structured product to hide these swaps and sell them to retail investors. They looked for countries that are wishes to be a financial hub and have a history of being pro-business and weak in consumer protection. Singapore and Hong Kong were selected.
This was the beginning of the crisis of the credit-linked notes.
Tan Kin Lian