European banks prepare for Russian fallout

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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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  • Banks await sanctions packages
  • Austrian, Italian and French banks are the most exposed
  • The Austrian RBI has prepared crisis plans

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

European Union ambassadors in Brussels were due to discuss a broader sanctions package after Russian President Vladimir Putin ordered the dispatch of troops to eastern Ukraine, and foreign ministers from the EU could decide on sanctions after a meeting in Paris this afternoon.

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The boss of HSBC (HSBA.L), one of Europe’s biggest banks, said on Tuesday he was concerned about the risk of “wider contagion” to global markets from the worsening crisis in Ukraine, although the bank’s direct exposure is 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 that while business is now normal, “in the event of an escalation, the crisis plans that the bank has prepared over the past few weeks will come into play. in force”. .

Shares of the Austrian lender fell 7% on Tuesday morning.

An index of European banking stocks fell 1.2%, stronger than the 0.8% drop in the Euro Stoxx index.

ING of the Netherlands, which has a significant presence in Russia, said: “Further escalation of the conflict could have major negative consequences.”

As policymakers scramble to put in place sets of sanctions, German banks said they needed to ensure the sanctions were “precise and unambiguous”, removing any room for interpretation that could make it difficult the implementation of sanctions 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 the moment, the banks are in uncertainty until the sanctions become concrete. “We are monitoring the situation,” said a spokesman for the European Banking Federation in Brussels.

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

Our standards: The Thomson Reuters Trust Principles.

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