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

• Rising US bond yield will likely have limited impact on Asian banks’ funding profiles.
• Russia’s September digital ruble rollout is unlikely to exacerbate weaknesses in bank deposits, but depositor behavior warrants monitoring.
• Regulatory changes in Argentina are likely to increase foreign currency lending.
• The Lebanese parliament, central bank and commercial banks will continue to discuss terms and details on the “financial gap law” over the next two months.
• Tightening oversight of Kenyan banks’ credit pricing mode is likely to enhance transparent and disciplined pricing framework amid elevated credit risk.

Rising US bond yield will likely have limited impact on Asian banks' funding profiles. The potential of interest rate rise in the US will likely impact Asian banks’ funding costs in the form of rising deposit interest rates since most Asian banking sectors track US interest rate movements. However, the higher yield on the US 10-year and 30-year treasury since February 2026 will likely have a limited impact on Asian banks’ foreign funding. Although some Asian banking sectors have moderate levels of foreign exchange liabilities to total liabilities, most of these exist within the local banking sector, or are in the form of deposits. Foreign liabilities to total funds are also below or around 10% for all the banking sectors, limiting the impact from rising US treasury yields.

Russia’s September digital ruble rollout is unlikely to exacerbate weaknesses in bank deposits. Russia’s central bank governor reaffirmed that the financial system was ready for the targeted retail rollout of the digital ruble on Sept. 1. Market Intelligence expects initial household uptake to remain contained, despite news agency reports of rising retail depositors’ concerns about the safety of their funds held in banks and fears of a deposit freeze. In view of these concerns, retail depositors are unlikely to differentiate sharply between the digital currency (held in wallets ultimately tied to the central bank) and conventional deposits held within commercial banks, limiting immediate liquidity risks for lenders from the rollout. Additionally, the lack of interest remuneration on the digital ruble will likely further limit its attractiveness, relative to bank deposits. Nonetheless, banks’ liquidity coverage would be supported by standby central bank backing upon any large or abrupt deposit outflows, whether linked to the rollout or broader depositor concerns. Over the medium term, the phase out of Western payment infrastructure is likely to support wider retail digital ruble adoption.

Regulatory changes in Argentina are likely to increase foreign currency lending. The government of Argentina eased regulations related to foreign exchange lending and in parallel is pushing for a charter of the central bank for greater financial independence, suggesting that a full dollarization — an exchange of pesos for dollars — is now unlikely. Instead, the government and central bank have started to refer to the country as a bi-monetary economy where dollars and Argentine pesos are dealt freely. As a consequence, it is expected that banks will start seeing greater incentives to attract deposits and make loans in US dollars, particularly as we expect banks to reduce sovereign bond holdings as surpluses continue. While this is likely to bring indirect foreign exchange risks going forward, it is also likely that there will be greater credit depth, especially if markets start to believe in policy continuity in regards to monetary and fiscal matters.