The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Emerging market banks: In the line of fire

Banks in emerging markets appeared to have escaped the worst of the financial crisis. Now, as capital markets seize up and the global economy heads for recession, they must face the same liquidity and solvency pressures as their western counterparts. Sudip Roy looks at the banks most likely to cope.

embanks-main.gif

IN NOVEMBER, A presentation appeared on Latvian bank Parex’s website entitled ‘The leading independent bank in the Baltics’. Its timing was unfortunate.

Just days later, on November 7, the bank applied for support from the government following a run in which 12% of total deposits had been withdrawn since October 1. Latvia’s government acted immediately. The following day it announced that Parex, the Baltic republic’s second-biggest bank, had been nationalized after state-owned Mortgage and Land Bank acquired 51% of its shares. In addition, the government provided a liquidity injection and a guarantee for €775 million of syndicated loans that are coming due next year.

Even with these moves the bank’s future looks precarious. Resident and non-resident deposit outflows continue, according to Fitch Ratings, and the chairman of Mortgage and Land Bank has suggested that the government needs to inject at least a further Lats200 million ($355 million) of funds. Sixteen years after it opened its first commercial branch, Parex is on a life-support machine.

Decoupling debunked

The Parex crisis is not a parochial event. It is, so far, the highest-profile emerging markets banking casualty of a financial crisis that is spreading fast to all developing regions.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree