Banking Risk Monthly Outlook: October 2026

The global banking risk outlook for October 2026 indicates a focus on regulatory tightening in emerging markets, particularly concerning online lending in Southeast Asia and debt security exposures in Russia, alongside persistent household credit risks.

Key areas of concern include moderating household credit growth in Croatia following new lending limits and continued weakness in Brazil's household credit market. Authorities in Morocco and Kenya are advancing new frameworks to bolster financial stability.

Key developments shaping banking risk in emerging markets include increased regulatory oversight of online and BNPL lending in Southeast Asia, and new macroprudential measures in Russia and Croatia. These factors highlight a trend of proactive regulatory intervention to mitigate systemic vulnerabilities.

• Online Lending Regulation in Southeast Asia: Regulators in Indonesia, Malaysia, the Philippines, and Thailand are expected to tighten rules on online shopping and BNPL loans to limit risk spillovers to the commercial banking sector as household finances are buffeted by higher inflation and interest rates.
• Macroprudential Tightening in Russia: Russia is implementing new risk weights for debt security exposures backed by nonmortgage retail loans, a move intended to counter interbank risk and which is also expected to reduce credit supply.
• New Supervisory Framework in Kenya: Kenya’s proposed framework for domestic systemically important banks (D-SIBs) points to higher capital and liquidity requirements, strengthening the resilience of its largest banks.
• Household Credit Vulnerabilities in Brazil: Despite debt renegotiation campaigns, household credit in Brazil remains weak, with high debt-to-income ratios and rising concerns over impairment risks.

Across Southeast Asia, tighter regulations on online shopping loans are likely to be introduced to limit risk spillover to traditional commercial banks.

The rise of online shopping has led to a rise in small loans in Southeast Asia that do not appear in official statistics. Regulators in Indonesia, Malaysia, the Philippines and Thailand will likely increase their monitoring of these loans, which are mostly unregulated.

Unlike traditional nonbank financial companies (NBFCs), which are licensed, most of these online shopping lenders (some partnered with banks) offer “buy now, pay later” (BNPL) loans without a license and the loans do not undergo traditional credit checks.

With higher inflation and interest rates negatively impacting household finances, these small loans could affect borrowers’ ability to repay household loans granted by commercial banks, causing risk spillovers. 

Macroprudential tightening for debt security exposures is likely to counter Russian interbank risk linkages and reduce credit supply.

The Russian central bank’s finalization of macroprudential risk weights for debt security exposures for issuing and investor banks is likely to be risk positive. The measures will apply to debt securities backed by nonmortgage retail loans.

The latest macroprudential tightening is expected to counter regulatory arbitrage among lenders, while also increasing resilience against a potential source of credit risk. Credit risks partly reflect the rapid pace of retail lending expansion through 2023 and 2024, following bank support measures and regulatory forbearance.

The new measures are expected to tighten credit supply after coming into effect on Oct. 15, 2026, reaffirming Market Intelligence’s contained net credit growth forecasts for 2026 and 2027. 

Croatia’s tighter consumer lending limits from Oct. 1 are likely to moderate household credit growth.

The Croatian National Bank plans to halve banks’ exemption quotas for loans exceeding existing debt-service-to-income and loan-to-value limits amid sustained household lending growth.

Household loans continued to expand at double-digit rates through mid-2026, despite earlier macroprudential measures. This is prompting concerns that lower interest rates could encourage further borrowing and increase household vulnerability to future economic shocks.

The tighter framework is expected to improve underwriting standards and support portfolio quality. 

Brazilian households' debt-to-income ratio stood at 49.8% in the second quarter, just below the 49.9% reported in the first quarter — its highest level in 21 years of historical data. High interest rates, a common use of credit card payments via installments and higher costs of living are key drivers of this trend.

While the Desenrola 2.0 debt renegotiation program allowed some relief for the riskiest borrowers, it failed to address the fundamental causes of indebtedness. The issue is likely to return in the near future.

The presidential elections are unlikely to change this situation directly, and the uncertainty is likely to make the central bank stop lowering interest rates, as well as make debt rollover more expensive.