Banking Risk Monthly Outlook: February 2026

Our banking risk experts provide insight into these events impacting the financial sector in emerging markets in February:

• Venezuela's higher oil income
• Tightening of regulatory requirements in Vietnam 
• Bulgaria’s euro adoption 
• The Bank of Algeria's interest rate cap on commercial bank loans
• Elimination of the South African prime interest rate 

Venezuelan banks will face some limited improvements from higher oil income. 

Banks stand at a constrained capacity to capitalize on the oil agreement with the US following the apprehension of Venezuelan leader Nicolás Maduro. Years of hyperinflation, government interference and still-weak economic perspectives have contracted the banking sector’s size from 71% of managed assets relative to GDP in 2017 to 12% in end-2024; a significant retrenchment even in the face of quickly declining economic growth.

New oil revenues and a potential reopening to international markets should help banks to bring revenue in foreign currency and to receive some income from a potentially stronger economic outlook. A significant reshaping of the banking sector is unlikely over the short term and it would require major structural reforms to reverse the current outlook for banks.

The State Bank of Vietnam (SBV) is tightening regulatory requirements for commercial banks.

The SBV set its 2026 credit growth target of 15% for the banking sector and allocated lending quotas to banks based on banks' performance and banking sector restructuring priorities. Additional regulatory requirements include a reduced reserve ratio for healthy banks designated as “mandatory transferees” when they rescue troubled banks placed under “special control.”

In the first half of 2026, we are expecting the SBV to rebalance credit growth and support liquidity through targeted measures such as performance-based credit quotas and reserve ratio reductions for banks involved in restructuring efforts, maintaining a relatively steady loan-to-deposit ratio.

Bulgaria’s euro adoption will support near-term financial stability through FX risk elimination and regulatory convergence. 

The euro was adopted in Bulgaria on Jan. 1, 2026. Foreign exchange risk is likely to have been near-eliminated given that the significant exposure to the euro on bank balance sheets has been removed. Beyond FX risk diminishment, euro adoption enhances regulatory convergence with euro-area standards, particularly in banking supervision and financial sector oversight.

Bulgaria has remained on the Financial Action Task Force (FATF) grey list since October 2023, and we anticipate that regulatory convergence and strengthening in key areas, such as anti-money laundering and counter-terrorist financing, will remain a priority for authorities in 2026. Additional benefits include lower borrowing costs and improved liquidity backstops for the banking system, likely supporting financial stability and more resilient credit intermediation.

The Bank of Algeria will continue to enforce an interest rate cap on commercial bank loans in the first half of 2026. 

The interest rate ceiling is designed to regulate consumer credit, housing loans, leasing within the manufacturing sector, and bank overdrafts. These rates are generally renewed every six months, and the latest rates are slightly lower than last six-month reported rates due to moderating credit demand.

The interest rate cap aims to protect borrowers from excessive interest rates on different loan categories, with the exception of long-term housing finance or mortgages.

The South African Reserve Bank (SARB) is considering phasing out the commercial bank prime rate.

The SARB is considering eliminating the prime interest rate, historically set at 3.5% above the policy rate, to enhance transparency. This change, communicated by the SARB governor as a preference at the World Economic Forum in Davos on Jan. 22, 2026, would require banks to adopt new reference rates, increasing volatility and uncertainty in pricing loans and deposits.

This could lead to inconsistent borrower pricing, affecting loan portfolio quality and repayment behavior. Consequently, banks may face mismatches in asset and liability repricing, heightening interest rate risk.

—With contributions from Tan Wang and Thandeka Nyathi