Foreign banks’ EM exposure could spiral as Covid-19 bites – BIS

Activation of credit lines and guarantees could cause exposures to leap 26%

Entities in emerging markets could draw on billions of dollars’ worth of credit lines and guarantees extended to them by foreign banks through the Covid-19 crisis, data from the Bank for International Settlements shows, making these lenders more exposed to a wave of defaults in coming quarters.

Untapped credit lines were equivalent in size to 12% of the $5.05 trillion of outstanding claims (such as loans) on EM countries at end-2019. Credit guarantees amounted to $614.9 billion and derivatives