BLOG — Apr 20, 2026
Banking Risk Monthly Outlook: April 2026
What we're watching
Our banking risk experts provide insight into events impacting the financial sector in emerging markets in April:
- Remittances from the Gulf countries as a source of deposit mobilization will weaken in India, Sri Lanka, Bangladesh, and Pakistan.
- European bank exposures to Gulf Cooperation Council (GCC) countries are limited, although alternative risk channels are prominent.
- Elections in Peru and Colombia will bring a wait-and-see approach in banks’ credit policies.
- Rising geopolitical risks in the Middle East are likely to weigh on banking sectors in the broader region, particularly in Egypt, Tunisia, Lebanon, and Morocco.
- Botswana’s 2.8 billion pula borrowing from major banks will elevate sovereign exposure, and strengthen the sovereign-bank nexus.
Asia-Pacific banking risks
In India, Sri Lanka, Bangladesh, and Pakistan, remittances from the Gulf countries as a source of deposit mobilization will weaken in the coming months. South Asian banking sectors may face difficulty in absorbing shocks from US/Israel-Iran conflicts, as remittance inflows disruptions may introduce pressure on banks’ deposit mobilization momentum. Approximately half of Pakistan's foreign workers' remittances originate from the GCC countries and amount to approximately 5% of its GDP. Indian workers' remittances from the GCC reached US$40 billion in 2025. Under sustained strain in the Gulf economies, remittance inflows could weaken, which would increase pressure on banks' deposit mobilization and increase liquidity risks in the South Asian banking sectors.
Europe banking risks
European bank exposures to GCC countries are limited, although wider risk channels are prominent. Exposures of European Union banks to counterparts in the GCC are limited at less than 0.5% of total bank assets (or less than 0.4% of total liabilities) as of end-2025, according to the European Banking Authority. However, risk channels stem from a weakening of economic growth and higher inflation, and the impact of higher yields raising unrealized losses for banks’ held-to-maturity sovereign debt securities. Beneficially, a higher-for-longer interest rate path, in response to higher energy prices, provides an upside to banking sector profitability relative to our baseline forecasts, while the region’s banks have illustrated resilience to successive shocks — the COVID-19 pandemic, the Russian invasion of Ukraine and US tariffs — since 2019.
Latin America banking risks
Elections in Peru and Colombia will bring a wait-and-see approach in banks’ credit policies. With Peru and Colombia having their first-round elections on April 12 and May 31, respectively, we expect that banks will adjust their credit policies over the short term as they acquire more certainty over the future of their respective countries. For both countries, proposals regarding the regulation of the banking sector and taxation would likely require adjustments for compliance, therefore a wait-and-see approach is very likely to be seen over the course of April and over the second quarter of 2026. Historically, not all elections have brought a halt in lending, but we expect some diminishing in momentum over at least a couple of months, as more certainty is brought forward. Greater certainty brought by the first-round election results would likely bring more decisive actions by banks going forward.
Middle East North Africa banking risks
Rising geopolitical risks in the Middle East are likely to weigh on banking sectors in the broader region, particularly in Egypt, Tunisia, Lebanon, and Morocco. These regional banking sectors are likely to experience knock-on effects stemming from US/Israel-Iran conflicts, as the regional economies are vulnerable to rising inflation, oil prices, remittances inflows and deposit mobilization. Egyptian banks are particularly vulnerable due to reliance on foreign currency capital inflows from GCC countries, which are more likely to lead to funding volatility if the conflict escalates. The process of resuming negotiations between the International Monetary Fund (IMF) and Lebanon’s central bank has also stalled, as the ongoing conflict complicates the talks with the IMF. Generally, we expect that rising inflation and weakening tourism revenues may increase households’ debt-servicing burdens and lead to more pronounced credit risks within the region's banking sectors.
Africa banking risks
Botswana’s 2.8 billion pula (US$216.7 million) borrowing from three major commercial banks is likely to increase banks’ credit risk. In a recent government gazette dated March 6, 2026, it was disclosed that the government of Botswana plans to secure a syndicated loan amounting to approximately 2.8 billion pula (US$216.7 million) from the nation's three largest commercial banks. These banks collectively represented 56.6% of the total banking sector assets as of the end of 2024 (latest available). This marks a renewed reliance on commercial bank lending as Botswana faces increasing fiscal pressures and a widening budget deficit for the 2026/27 fiscal year. We expect the borrowing to increase banks’ exposure to the government and sovereign debt holdings, which constituted 6.8% of total assets at the end of September 2025, a figure that is currently the lowest share across sub-Saharan Africa. Consequently, this borrowing strategy is poised to further strengthen the link between fiscal performance and bank balance sheets, thereby increasing systemic vulnerabilities.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.