The combination of large foreign-currency debt burdens, low FX reserves and weakening currencies means that the risk of sovereign defaults in Sri Lanka and Tunisia is growing. Elsewhere, China’s largest property developer, Evergrande, appears to be close to collapse, which would cause large losses for banks and bondholders. Were this to cause stress in the banking sector, the government would ultimately step in to restore stability. Elsewhere, banking sectors in Turkey, India and the UAE are points of concern.
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