Turkish banks ‘most fragile’ against Fed

STANBUL

Turkish and South African banks have been named as the most vulnerable systems regarding the U.S. Central Bank’s bond purchase tapering by the international rating agency Standard & Poor’s.

According to a report called “Which Emerging Market Banking Systems Could Suffer Most from Fed Tapering?” the banking systems of the two countries were found to be the most fragile of the seven emerging markets reviewed in the study.

“While our base-case scenario assumes the Fed’s gradual removal of unconventional monetary support won’t derail the economic recovery in developed countries, we expect emerging markets to experience episodes of instability. In particular, countries whose economies display significant external vulnerability, such as a large current account deficit or net external debt, will have a more difficult time coping,” read the report.

“Banking systems can feel the impact of tapering directly through more limited access to external funding or through increasing costs to refinance external debt,” the report said.