Fitch Upgraded More Emerging-Market Banks Than Downgraded
As liquidity costs rise, operators in affected regions should prepare for tighter credit and volatile debt markets.
Updated on Sept. 30, 2026 in Corporate Finance
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Fitch Ratings reported more bank upgrades than downgrades globally through the first nine months of 2026, even as it shifted the Middle East banking outlook to deteriorating. Higher energy prices triggered early central bank rate hikes, creating margin pressure across the Asia-Pacific and Middle East regions.
Why it matters
Rising liquidity costs are tightening margins for regional lenders, forcing businesses to navigate potential credit constraints. These shifts reflect broader economic pressures as central banks prioritize rate hikes to counter energy-driven inflation.
Gulf banks received $77 billion in government-related deposit inflows during the first half of 2026, while certificate of deposit issuance dropped 38% year-to-date. Saudi banks specifically saw debt issuance decline by approximately 50% during the same period.
The players
Fitch Ratings
A global credit rating agency that provides independent financial data and analysis on sovereign and corporate debt.
The details
Banks are managing margin compression by utilizing robust balance sheets established since 2020 to absorb potential credit losses. However, the combination of higher interest rates and increased energy prices has forced lenders to reduce reliance on certificate of deposit issuance. This liquidity squeeze is expected to persist until at least early 2027, as analysts forecast a potential $70 billion to $80 billion in debt issuance for next year.
Timeline
2020 marked the start of banks strengthening their balance sheets.
The first half of 2026 saw Gulf government deposit inflows reach $77 billion.
Fitch Ratings recorded rating changes through September 30, 2026.
A durable agreement to reopen the Strait of Hormuz is not expected until Q1 2027.
Market Landscape
The transition to a deteriorating outlook for Middle East banking follows a broader industry trend of tightening liquidity amid global rate hikes. This development mirrors similar sector downgrades recently observed in Turkey, the Philippines, Sri Lanka, and Latin America.
Operators in regions facing lowered sector outlooks should stress-test their credit facilities and monitor upcoming debt issuance costs. Budgeting for higher financing expenses is recommended as liquidity remains expensive through the end of the year.
The takeaway
While global banks have largely navigated early 2026 volatility using legacy balance sheet strength, the ongoing liquidity squeeze signals a tougher credit environment ahead. Review your existing debt covenants and speak with your lenders about potential shifts in credit availability before year-end.
Further reading
For more on credit trends and financial risk, visit the Corporate Finance section.
Source note: This article includes information reported by Intellinews.
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