A closer look at EMs’ exposure to bank flows

A key channel through which emerging markets could be affected by the strains in the global banking sector is if lending by foreign banks falls sharply. On this front, EMs’ vulnerabilities have eased since the Global Financial Crisis. But there are still areas of concern, particularly in countries that are reliant on banking sector flows to finance large current account deficits. That includes parts of Eastern Europe (particularly Turkey) and Latin America (Chile, Colombia). Risks in Asia look much more contained.

In view of the wider interest, we are sending this update to clients of all our emerging markets services.

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