EM banks: where do the risks lie?

Non-performing loans are likely to climb in many EMs as output and incomes collapse, potentially forcing policymakers in some countries to step in and recapitalise banks. The risks are greatest in Brazil, Mexico and India, where policymakers’ reluctance to provide significant fiscal support could see NPLs surge. Meanwhile, problems on the liabilities side of banks’ balance sheets are most likely to occur in Turkey, where large short-term external debts will be increasingly difficult to roll over.