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EM slowdowns and NPLs: lessons from the past

Non-performing loan (NPL) ratios have risen by as much as 4-5%-pts during non-banking crisis downturns in EMs in the past. This time around, there are reasons to think that the increase will be smaller and EM banks generally look well placed to cope. But NPLs may rise by more in countries that have experienced recent credit booms and large interest rate hikes (e.g. Brazil, Chile, Korea and Hungary) and rising NPL ratios may expose banks with weaker balance sheets in parts of Latin America and Emerging Europe.

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