From contagion to sanctions, European banks brace for Russian fallout

The City of London’s financial district is seen as people walk on the Millennium Bridge in London, Britain February 16, 2022. REUTERS/Henry Nicholls/File Photo

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  • Britain announces modest set of sanctions, more possibly to come
  • EU to agree sanctions on Tuesday
  • HSBC fears ‘wider contagion’
  • The Austrian RBI has prepared crisis plans
  • The most exposed Austrian, Italian and French banks

LONDON/VIENNA, Feb 22 (Reuters) – European banks braced for fallout and further sanctions on Tuesday after Russia ordered troops into breakaway regions of eastern Ukraine, HSBC warning guard against market contagion and Austria’s Raiffeisen Bank International preparing “crisis plans”.

European banks – particularly those in Austria, Italy and France – have the world’s most exposure to Russia and have been on high alert for weeks if governments impose new sanctions on the country. Read more

Britain was the first on Tuesday to move – hitting five banks and three high net worth individuals – a relatively soft package that British Prime Minister Boris Johnson said allowed it to “book powerful new sanctions” for anything ” Putin could do next.” Read more

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In the European Union, officials are discussing banning trade in Russian government bonds and punishing hundreds of people.

“Russia’s aggression against Ukraine is illegal and unacceptable,” European Commission President Ursula von der Leyen tweeted. “A first sanctions package will be officially tabled today.” Read more

The US is also preparing a package of sanctions as German Chancellor Olaf Scholz said he was suspending certification of the Nord Stream 2 gas pipeline, an important future energy source for Europe’s biggest economy. Read more

Some experts have questioned the effectiveness of Britain’s strategy of keeping its powder dry.

“I can see the strategic logic of leaving leeway to go further… But will Putin care? I don’t think so,” said sanctions expert and firm partner Paul Feldberg. of Jenner & Block lawyers.

Since Russia’s annexation of Crimea in 2014, the United States and the European Union have blacklisted specific individuals, sought to limit Russian public financial institutions’ access to Western capital markets, imposed bans on the arms trade and other limits on the trade in technology, such as that of the oil sector.

FEAR OF CONTAGION

This caused banks to reduce their exposure to Russia, which made some bankers less concerned about the threat of sanctions on their activities and more focused on the impact of geopolitical tensions on the market.

The boss of HSBC (HSBA.L), one of Europe’s biggest banks, said on Tuesday that “broader contagion” for global markets was concerning, even if the bank’s direct exposure was limited. Read more

“It is clear that there is a likelihood of contagion or second order effect, but it will depend on the severity of the conflict and the severity of the retaliation if there is conflict,” Noel Quinn told Reuters in a statement. interview.

RBI (RBIV.VI), which has large operations in Russia and Ukraine, said business was now normal, but “in the event of an escalation, the crisis plans the bank has prepared in recent weeks will come into effect. “. .

Shares of the Austrian bank were down 5.5% at 12:19 GMT.

Dutch lender ING (INGA.AS), which has a strong presence in Russia, said: “Further escalation of the dispute could have major negative consequences.”

A Danish Danish pension fund said it would immediately stop new Russian investment following Putin’s arrival in Ukraine. Read more

As policymakers scramble to put in place sets of penalties, German banks said they needed to ensure they were “precise and unambiguous”, removing any room for interpretation that could make it difficult their implementation by financial companies.

Details are important as failure to comply would result in severe penalties.

“For the banks, it is crucial that the sanctions are worded sufficiently precisely and unambiguously, (and) leave no open questions for interpretation,” the German banking association said in a statement.

For now, the banks can only wait. “We are monitoring the situation,” said a spokesman for the European Banking Federation in Brussels.

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Additional reporting by Iain Withers and Tommy Reggiori Wilkes in London and Toby Sterling in Amsterdam; Written by Tom Sims; Editing by Kirsti Knolle, Madeline Chambers, Jan Harvey and Tomasz Janowski

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