The European Central Bank is pushing lenders from the region that still have operations in Russia to accelerate plans to shrink or exit units in the market, after President Vladimir Putin’s full-scale invasion of Ukraine.
(Bloomberg) — The European Central Bank is pushing lenders from the region that still have operations in Russia to accelerate plans to shrink or exit units in the market, after President Vladimir Putin’s full-scale invasion of Ukraine.
The ECB recently “urged these banks to speed-up their downsizing and exit strategies by adopting clear roadmaps” and regularly reporting on progress to their management bodies and the watchdog, according to Andrea Enria, who leads the ECB’s Supervisory Board.
Several European banks have earned bumper profits in Russia over several years thanks to growth rates that were higher in their home markets. The war in Ukraine then exposed this group of lenders to risks to their finances and their reputations, with some taking more radical action to leave the market than others.
“I have repeatedly and publicly expressed concerns about the disappointingly slow progress made by banks in reducing risks stemming from ongoing operations in the Russian market,” Enria wrote in a letter to members of the European Parliament.
Banks overseen by the ECB cut their Russia exposures 37% last year, with an acceleration in the fourth quarter, Enria said.
What Bloomberg Intelligence Says:
EU banks have about €45 billion of total exposure to Russia as of 1Q, or nearly half of that figure reported just after the February invasion of Ukraine. Raiffeisen, with more than €20 billion, is by far the most exposed, with management projecting as much as a 230-bp hit to CET1 should it fully write down its Russia unit. That compares with guidance of 40 bps at UniCredit and 70 bps at OTP.
-Tomasz Noetzel, BI Senior Industry Analyst
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“Most institutions have also decided not to accept new business in Russia and are exploring different exit strategies, such as sale of business and winding down their operations in the Russian market,” he wrote.
Enria also said that the ECB is “continuously evaluating whether further supervisory actions are warranted” for individual banks, including in relation to their capital adequacy.
–With assistance from Marton Eder.
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