Limited Credit Impact on Canadian Banks From the Russia-Ukraine Conflict

Following the Russian invasion of Ukraine, many countries have quickly imposed sanctions on Russia, including Canada, the United States, the European Union, and the United Kingdom, among others. The sanctions are intended to paralyze Russia's financial, energy, and transportation sectors. Indeed, Russian banks have been blocked from the Society for Worldwide Interbank Financial Telecommunications (SWIFT) international payment system, the high security network that processes payments among 11,000 financial institutions across the globe. Countries have also announced restrictive measures to prevent Russia's central bank from deploying its international currency reserves. While these moves have put significant stresses on the Russian economy, we do not expect the current conflict to have any impact on Canadian banks we rate, given their immaterial direct exposures to Russia and Ukraine, as long as this remains a regional conflict.