https://ift.tt/fb6liKY In Europe Get Ready For Russia Fallout As US Banks Record Limited Pain – Cryptovibes.com – Daily Cryptocurrency and FX News

As the Ukraine crisis intensifies, European banks on February 23 were bracing for the fallout from fresh global sanctions. However, U.S. bank executives said that they expected the industry to be insulated from major disruption after pulling back from Russia in recent years.

For weeks, Europe’s banks- particularly those in Austria, Italy, and France – have been on high alert in case the government imposes new sanctions against the country, seeing that they are the world’s most exposed to Russia.

Austria’s Raiffeisen Bank International (RBI) said it was preparing “crisis plans” while HSBC warned of market contagion.

After recognizing two breakaway regions of Ukraine, Britain was the first on February 22 to move in retaliation and send troops. Hitting five banks and three individuals, Prime Minister Boris Johnson said it was a relatively mild package that allowed him to “reserve further powerful sanctions” for whatever “Putin may do next”.

Sanctions that will ban EU investors from trading in Russian state bonds, target imports and exports with separatist entities, and blacklist more politicians, lawmakers, and officials were also agreed upon by the European Union.

Joseph Borell, the EU’s foreign policy chief told a news conference:

“This package of sanctions… will hurt Russia, and it will hurt a lot.”

The certification of the Nord Stream 2 gas pipeline, an important future energy source for Europe’s largest economy, was to be halted by German Chancellor Olaf Scholz.

On Tuesday afternoon, apart from warning that Russia would pay an even steeper price if it continued its aggression, U.S. President Joe Biden also announced sanctions targeting two Russian banks, the country’s sovereign debt, and Russian elites and family members.

The United States and European Union have imposed bans on weapons trade and other limits on the trade of technology, such as that for the oil sector, blacklisted specific individuals, and sought to limit Russia’s state-owned financial institutions’ access to Western capital markets since Russia’s annexation of Crimea in 2014.

In the United States, measures were taken to ensure that banks did shrink their exposure to Russia. The move made bankers more focused on the market of geopolitical tensions and less keen about the threat of sanctions on their business.

Even if the bank’s direct exposure was limited, the boss of HSBC (HSBA.L), one of Europe’s largest banks, said that “wider contagion” for global markets was a concern.

In an interview, Noel Quinn told Reuters:

“It’s clear that there is a likelihood of contagion or some second-order effect, but it will depend on the severity of the conflict and the severity of the retaliation if there is a conflict.”

Given that lenders have little exposure to the Russian economy, four executives familiar with industry thinking said, U.S. banks, in the meantime, are not expecting global sanctions to have a major impact on American bank businesses or spark contagion risk.

In Q3 2021, U.S. lenders had outstanding claims of just $14.7 billion on Russia, according to the Bank for International Settlements (BIS).

Meetings between the Biden administration, U.S. banks, and financial industry lobby groups have been held to discuss sanctions in recent days, as highlighted by three sources. In the past week, one source said banks spent a lot of time identifying who might be the potential targets of the sanctions to enable them to move quickly.

The executives in the industry had been reached out to by the administration before Christmas and had kept banks apprised of its thinking, according to another source.

Although it is seen as unlikely in the near future, the disruption that might be created if the U.S. decides to target Russia’s access to the SWIFT international payment network was one area of potential concern, this person added.

That is because the economy and everyday citizens could be seriously hurt if Russia is cut off from the international payments network and it would create enormous compliance and complexity risks for the global banking industry.

Saying that business was normal, RBI (RBIV.VI), which has significant operations in Russia and Ukraine, however, said that in the event of an escalation of the crisis, plans that the bank has been preparing over the past few weeks will come into effect”.

On Tuesday last week, the Australian bank’s shares fell 7.48%.

A Dutch lender ING (INGA.AS), which has a large presence in Russia, said:

“A further escalating conflict could have major negative consequences.”

In the wake of Putin’s move into Ukraine, one Danish pension fund said it would immediately halt new Russian investments. To reduce complexity for the industry, bankers said they hoped governments would coordinate as they drafted the fine print, with several jurisdictions rolling out new sanctions.