Posted Jan 27, 2022, 5:32 PMUpdated Jan 27, 2022, 6:45 PM
The rise in tensions between the United States and Russia, against a backdrop of the threat of a Russian invasion of Ukraine, is beginning to worry the financial authorities. The European Central Bank (ECB) has asked banks in the euro zone for information on the nature of their risks and their exposure to Russia, in case the situation were to deteriorate.
While around 100,000 Russian soldiers are massed on the border with Ukraine, Washington has warned that economic sanctions could fall in the event of an invasion of the country by Moscow. The Kremlin has always denied having such intentions, but the scenario is taken seriously by the ECB, which wishes to prepare for any eventuality.
According to the “Financial Times”, the supervisor would seek in particular to know how the banks could manage a possible cut of access of the Russian financial institutions to Swift, the international system of financial transactions. The option would indeed have been studied on the American side. It could have a damaging effect on the entire Russian banking system.
The Italian UniCredit, the Austrian Raiffeisen Bank and Société Générale are among the most established foreign banks in Russia. The French group is present in the country through its subsidiary Rosbank, which has a network of 230 branches. It is positioned as the leading international banking group for individuals, with outstanding loans of 8.7 billion euros and outstanding deposits of 10.1 billion (at the end of 2020).
At Societe Generale, we are trying to play down the situation. “We are closely following developments in the situation in Russia. Rosbank continues to operate as normal under existing supervision, a spokeswoman said. Rosbank is a Russian bank, mainly established at the local level. We are fully confident in our ability to continue working for our clients”.
According to our information, Societe Generale did indeed have to provide a great deal of information to the supervisor on its exposure and the risks incurred. But at this stage, she would not have received an answer from Frankfurt.
Regular stress tests
Overall, it remains difficult for the moment to know what the nature of the shock on the banks would be. But sanctions could cause refinancing difficulties for their local subsidiaries, or constrain banks whose certain customers would be targeted by economic sanctions.
Other shocks – purely economic – could intervene if the geopolitical crisis were coupled with a storm on the markets or on the exchanges in Russia. “The banking authorities naturally ask these types of questions to institutions when a crisis arises, but this is not specific to the crisis in Ukraine”, explains a good connoisseur of supervision.
Internally, banks are required to regularly conduct their own solvency stress tests (holding sufficient capital) and liquidity based on risk scenarios corresponding to their individual profile. Asked, the European Central Bank (ECB) did not comment.