LTCM 2.0: Global Banks Most Exposed to US Sanctions


Following Zoltan Pozsar’s blueprint for how the US/UK/EU sanctions unveiled over the weekend could lead to problems in the “plumbing” of the global financial ecosystem, we have seen several cracks appear already.

Dollar liquidity is drying up – and thus getting more costly – especially against the Euro…

And while both US and European bank stocks were clubbed like a baby seal today, we note that US bounced back modestly while Europe’s financials couldn’t managed much (despite the overall indices rebounding from deep losses)…

So, the question is – which banks are most exposed to the ongoing (and escalating) threat of sanctions on Russia?

Specifically, among other more arcane details, the sanctions relate to:

  • freeze of assets,
  • capabilities of certain largest Russian banks to process transactions and
  • proposed ban of certain payment avenues (SWIFT).

While the Russian banks have been in freefall recently (most especially the sanctioned ones)…

In their latest report, Goldman Sachs attempts to calculate the exposures that US and European banks face to these threats.

European banks exposure

In assessing exposure to Russia we use data from the latest EBA transparency exercise (June 2021); we acknowledge that certain banks have disclosed more recent figures and that the aggregate picture may have changed since June 2021 – but we use EBA data for the purpose of comparability. This data shows that (i) overall Russia exposure of European (EU/EEA) banks is small at €66bn – this is equivalent to 0.25% of banks aggregate exposure amount, (ii) concentrated among three banks (RBI, SG and UCG) and (iii) the impact on these groups is diluted owing to geographic diversification (Russian exposure is <5% of group loans for all banks apart for RBI at 9%). The direct exposure is therefore limited, in our view.

The EBA data shows that the banks with the largest exposure to Russia are (as at 06/21):

  • UniCredit: Total exposure of €13.7bn (of which €1.2bn is Government, €12.6bn is Retail & Corporate) equivalent to 1.6% of total exposure.
  • Société Générale: Total exposure of €14.3bn (of which €2.5bn is Government, €11.8bn is Retail & Corporate) equivalent to 1.7% of total.
  • Raiffeisen Bank International: Total exposure of €14.3bn (of which €2.4bn is Government, €11.9bn is Retail & Corporate) equivalent to 9.3% of total exposure.

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