Yahoo Finance French and Italian banks owed $50bn by Russia
Banks in Italy and France are most vulnerable to the West’s onslaught of financial sanctions on Moscow after its lenders built up a combined $50bn (£37bn) in Russian exposure.
Shares in Societe Generale, UniCredit and Austria’s Raiffeisen tumbled on Monday over fears that exposed European lenders will be hit by the fallout of tough sanctions, including ejecting selected Russian banks from the Swift global payments messaging system.
Lenders in Italy and Austria are among the most vulnerable to the crisis and have failed to reduce their exposures to the Russian economy since the Crimea annexation in 2014, according to data from the Bank for International Settlements.
Foreign lenders’ total exposure to Russia is about $90bn, according to JPMorgan, as the West targets its banking sector in a bid to inflict economic pain.
There are fears the Swift removal will make it harder for Russian firms to repay their debts to European banks and could disrupt trade, while some lenders also have subsidiaries in the country which is facing a deep recession.
While French banks have cut their borrowing exposure, which once stood at more than $50bn, they and Italian lenders still had $25bn each in outstanding claims by the third quarter of 2021.
Austrian banks had almost $18bn while UK banks’ exposure was much lower at $3bn.
Kian Abouhossein, an analyst at JPMorgan, said: “The impact will be mainly on Russian and European Banks, rather than the US.
He said the “implications of Swift exclusion for Russia’s cross-border transactions are significant” and raises questions over “whether Russia’s exports indeed shall continue to flow”.
Shares in Europe’s banking sector hit their lowest level in more than five months on Monday, sinking more than 6pc.
Heavily exposed Austrian bank Raiffeisen has seen its share price almost halve in just over two weeks and led the declines in the sector. Shares in Italy’s UniCredit tumbled 11pc while Societe Generale plunged by 10pc.
Mr Abouhossein added: “The key risk for European banks relates to potential GDP downgrades due to higher commodity-related prices (with as much as 40pc of Europe’s natural gas supply coming from Russia) and hence most importantly potential delays in interest rate hike expectations.”
