Emerging troubles

IN THEORY, HSBC and Standard Chartered, two British banks with large Asian operations, are still mulling whether they should relocate their headquarters somewhere east of Suez. Given the turmoil that has afflicted emerging markets in recent weeks—and a useful tax break from the British government—few now expect the duo to decamp. Having been celebrated by investors for global networks spanning the likes of China, India and Brazil, banks are now being punished for them.

Emerging markets boomed partly on the back of cheap funds that Citigroup, HSBC, StanChart and others helped shovel their way—a flow now operating in reverse. Bankers battled to lend money to firms digging mines, erecting skyscrapers and building factories on the assumption that growth in China would never falter.

Those loans look less canny now that China’s slowing economy and tumbling commodity prices have dimmed the currencies and prospects of many emerging markets. A few customers will undoubtedly default, starting with firms which borrowed in dollars but relied on income in ringgit, rand or rupiah to meet repayments.

Loan losses are starting to creep up. StanChart,...

from The Economist: Finance and economics http://ift.tt/1fXesVc