“Because emerging-market companies have been able to borrow so cheaply from foreign lenders, domestic banks had to find other customers. In other words, they had to lower their lending standards. A sharp run up in interest rates—which happens when central banks try to fight the currency slump by raising interest rates—could expose just how weak some of those borrowers were,” reports Matt Phillips for Quartz.

Exacerbating potential problems for EMFN and any emerging markets ETF laden with bank stocks are higher borrowing costs, which,as Quartz notes, could force developing world companies to withdraw their deposits making it harder banks to operate. [BIITS Rate Hikes Not Doing Much Good]

iShares MSCI Emerging Markets Financials ETF

ETF Trends editorial team contributed to this article.