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By Bloomberg View

The extended routin emerging markets raises a question: Who stands to bear the most losses? Judging from the available data on cross-border exposures, it's worth keeping an eye on banks in Spain, the U.K. and Taiwan.

QuickTakeFinancial Contagion

China's decision earlier this month to devalue the yuan has accelerated declines in the stocks and currencies of countries ranging from Russia to Colombia. The selloff in part reflects concerns about the ability of developing-nation companies and governments to bear their foreign debts, which have grown rapidly in recent years.

Consider, for example, the cross-border exposures -- including loans and derivatives -- of global banks to countries that have experienced significant currency depreciation over the past month. As of March, they stood at more than $4 trillion, according to the Bank for International Settlements. Here's a breakdown, as a share of the debtor countries' gross domestic product:

If loans start going bad and losses mount, will there be another financial crisis? It's hard to know. If the losses are spread widely among investors who can afford to take a hit, no problem. If they're concentrated in large, thinly capitalized banks, that's more troubling.

To get a sense of where the weak points might be, we can look at which countries' banks have the largest exposures to the relevant emerging markets. U.K. banks are the most exposed in dollar terms, at about $895 billion, according to the BIS. As a share of gross domestic product, though, Spain wins by a large margin, at almost 45 percent. Greece ranks fourth, at 15 percent of GDP. Here are the top ten plus the U.S.:

In the wake of the 2008 financial crisis, global regulators required banks to finance themselves with more capital, which has the benefit of absorbing losses in bad times. If the turmoil in emerging markets gets worse, we may learn whether or not it was enough.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.