European banks were bracing for the fallout from fresh global sanctions. This is as the Ukraine crisis escalated. Even the U.S. bank executives said that they expected the industry to be insulated from major disruption after pulling back from Russia. Europe’s banks particularly those in Austria, Italy and France are the world’s most exposed to Russia.
Also, they have been on high alert and the governments should impose new sanctions against the country. HSBC warned of market contagion and Austria’s Raiffeisen Bank International (RBI) said that it was preparing crisis plans. Britain was the first to move in retaliation for Russia recognising two breakaway regions of Ukraine and also sending troops. Britain hit five banks and three individuals. Prime Minister Boris Johnson said that this allowed him to reserve further powerful sanctions for whatever Putin may do next.
The European Union also agreed sanctions that will blacklist more politicians, lawmakers and officials, ban EU investors from trading in Russian state bonds, and target imports and exports with separatist entities. This package of sanctions will hurt Russia, as per the EU’s foreign policy chief Josep Borrell. German Chancellor Olaf Scholz said that he was halting the certification of the Nord Stream 2 gas pipeline. Then, the U.S. President Joe Biden announced sanctions targeting two Russian banks, the country’s sovereign debt, and Russian elites and family members, and also warned that Russia would pay an even steeper price if it continued its aggression.
The United States and European Union have blacklisted specific individuals, sought to limit Russia’s state-owned financial institutions’ access to Western capital markets. They also have imposed bans on weapons trade and other limits on the trade of technology. This caused banks, to reduce their exposure to Russia. And that makes some bankers less concerned about the threat of sanctions on their business. So that they are more focused on the market impact of geopolitical tensions.
According to the Bank for International Settlements, U.S. lenders had outstanding claims of just $14.7 billion on Russia. This is in the third quarter of 2021. U.S. banks and financial industry lobby groups have held meetings with the Biden administration. Another said that the administration had reached out to executives in the industry before Christmas. RBI, said business was now normal, but in the event of an escalation, the crisis plans that the bank has been preparing over the past few weeks will come into effect.
Shares in the Austrian bank fell 7.48%. Dutch lender ING, which has a large presence in Russia, said that, further escalating conflict could have major negative consequences. One Danish pension fund said that it would immediately halt new Russian investments in the wake of Putin’s move into Ukraine. With several jurisdictions rolling out new sanctions, bankers said that they hoped governments would coordinate. Because they drafted the fine print.