The European and Australian banking industries are starting to measure the impact of the Ukraine crisis on ongoing businesses. Bankers are bracing for the impact of global sanctions imposed on Russia.
European banks, especially those in Austria, Italy and France, which are most exposed to Russia, quoted Reuters on Wednesday (23/2). This bank group for weeks has been very wary of the government imposing new sanctions on the Red Bear Country.
HSBC warned of the impact of market contagion from Russia to other countries. Meanwhile, Raiffeisen Bank International (RBI) Austria said it was preparing a strategy to deal with the crisis.
At the very least, the European Union (EU) has approved sanctions that would blacklist more Russian politicians, lawmakers and officials. It also barred EU investors from trading in Russian sovereign bonds, and targeted imports and exports with separatist entities.
"This package of sanctions will hurt Russia, and will be very detrimental," EU foreign policy chief Josep Borrell told a news conference.
German Chancellor Olaf Scholz said he was halting the certification of the Nord Stream 2 gas pipeline originating from Russia. In fact, this gas is an important future energy source for Europe's largest economy.
Then on Tuesday afternoon US President Joe Biden announced sanctions targeting two Russian banks. Also the national debt, and the Russian elite and family members, and warned that Russia would pay a higher price if it continued its aggression against Ukraine.
Since Russia's annexation of Crimea in 2014, the United States and the European Union have blacklisted certain individuals. Along with limiting the access of Russian state-owned financial institutions to Western capital markets.
It also imposes a ban on the arms trade and other restrictions on the trade in technology. The same is true for the oil sector.
This caused banks, particularly in the United States, to reduce their exposure to Russia. So that the current Ukrainian crisis will not pose a threat to business. But US bankers are more focused on the market impact of these geopolitical tensions.
Noel Quinn, HSBC boss as one of Europe's largest banks, the wider contagion for global markets is a concern, although the bank has limited exposure.
"It is clear that there is a possibility of second-degree contagion or effect, but that will depend on the severity of the conflict and the severity of retaliation if there is a conflict," he said.
US banks, meanwhile, do not expect global sanctions to have a major impact on American bank business or trigger contagion risks. Given that the lender has little exposure to the Russian economy, said four executives familiar with industry thinking.
According to the Bank for International Settlements, US lenders had outstanding claims of just $14.7 billion in Russia in the third quarter of 2021.
US banks and financial industry lobby groups have held meetings with the Biden administration to discuss sanctions in recent days, three sources said. One said banks have spent the last 24 hours identifying who might be potential targets for sanctions so they can move quickly.
Others said the government had reached out to executives in the industry before Christmas and had made banks aware of its thinking.
This person added that one area of potential concern is the possible disruption if the US decides to target Russia's access to the SWIFT international payments network, although that is unlikely to happen any time soon.
That's because cutting Russia off the international payment network could be very detrimental to the economy and its citizens on a day-to-day basis, and would create enormous complexity and compliance risks for the global banking industry.
