The sharp collapse in commodities (particularly crude, base metals, and coal) has wreaked havoc among many of Canada’s energy and mining companies. Many have been forced to slash expenses and cut their dividends in order to survive.

What many investors don’t realize is that the impact of the collapse in commodities extends well beyond mining and the energy patch. It is affecting the broader Canadian economy as well as other commodity-dependent economies, and it has an effect on other economic sectors including banking.

One bank that could see its growth plans derailed by the commodities collapse is Canada’s most international bank, Bank of Nova Scotia (TSX:BNS)(NYSE:BNS). 

Now what?

The bank’s direct exposure to commodities is relatively low–only 3.5% of the value of its loans under management are exposed to energy companies, and a mere 1.5% of loans are to mining companies. It has also impressively managed to shrug off the effects of a weak Canadian economy that has been impacted by weak commodities prices. Bank of Nova Scotia has had a respectable performance for the fourth quarter 2015.

However, what many investors don’t realize is that the bank’s international business, which generates 30% of its net income, gives it considerable indirect exposure to commodities.

You see, the majority of its international business is focused on Latin America, particularly the Andean nations of Colombia, Peru, and Chile. Each of these countries is highly dependent on the extraction and export of commodities as a key driver of economic growth. Now, with the oil shock and commodities collapse, the economic outlook for these countries has been downgraded.

Colombia, where Bank of Nova Scotia operates the country’s fifth-largest bank, is a good example of this. This is because oil, natural gas, and coal make up over 60% of the country’s exports, and the commodities collapse has caused Colombia’s 2015 forecast GDP to be slashed from 4.2% to 2.8%.

Peru, where it operates the Andean nation’s third-largest bank, is fairing just as poorly as weak precious metal prices weigh heavily on its economic outlook. Gold and silver, two of Peru’s most important exports, are at their lowest levels since the global financial crisis, forcing the central bank to revise its 2015 GDP forecast from 4.5% to 3%.

Then there’s Chile, where Bank of Nova Scotia invested over US$1.4 billion in a joint consumer-credit venture with the country’s largest retailer Cencosud SA in 2014. Chile’s number one export is copper, which has tumbled to a six-year low, causing its 2015 GDP growth forecast to be revised from 2.2% to 2%.

The recent rate hike by the Fed will also impact emerging markets. Higher U.S. interest rates have triggered an outflow of capital and greater inflationary pressure as a stronger U.S. dollar makes imports more expensive.

These factors will take their toll on demand for credit and loan growth, causing growth for Bank of Nova Scotia’s international business to slow. There will also more than likely be an uptick in non-performing loans as unemployment rises and wage growth stagnates. 

So what?

This certainly doesn’t bode well for Bank of Nova Scotia’s international business; its performance is likely to be muted for the foreseeable future.

Nonetheless, over the long term I doubt there will be any significant impact because a range of social and economic factors are set to drive demand higher for financial and wealth management products and services across Latin America.

Bank of Nova Scotia also successfully positioned itself ahead of the event horizon, restructuring its international business and aggressively cutting costs, leaving it well positioned to weather any significant downturn triggered by the commodities crunch.

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Fool contributor Matt Smith has no position in any stocks mentioned.