European Banks’ Exposure to Potential Russia-Ukraine Conflict

DBRS Morningstar has released a commentary discussing European banks’ exposure to a potential conflict between Russia and Ukraine.

Key highlights include:

• In the scenario of an armed conflict between Russia and Ukraine, several Western countries and organisations have expressed their intention to impose sanctions on Russia.

• In case of potential sanctions, European banks exposed to Russia would face different risks, including: i) market risk, ii) credit risk, and iii) operational risk.

• Despite the unpredictable consequences of an armed conflict between Russia and Ukraine, the direct impact from the imposition of sanctions on Russia should be marginal for European banks.

“According to DBRS Morningstar analysis, only five large banks in Europe have an exposure to the Russian Federation higher than 1% of total Risk-Weighted Assets (RWAs). Furthermore, only two have exposures higher than 5% of total RWAs: Raiffeisen (9.6%) and RCB (10.7%)” said Pablo Manzano, Vice President, Global Financial Institutions at DBRS Morningstar.