European financial industry warns against Ukraine move
Europe’s financial sector collapsed today after Russia invaded Ukraine, with Allianz revealing it had frozen its exposure to Russian government bonds and UK bank Lloyds saying it was in ” heightened alert” for cyberattacks.
Deutsche Bank said it had contingency plans in place and European officials warned a new round of sanctions was in sight.
Shares of major banks fell in morning trading. An index of European banking stocks fell 5.6% in mid-morning trading, more pronounced than a 3.4% drop in the Euro Stoxx index.
Banks with significant operations in Russia were particularly hard hit, with Austria’s Raiffeisen Bank International losing 16.5% and Societe Generale losing 7.6%.
Shares of UniCredit, whose Russian branch is one of the country’s biggest lenders, fell 8%, before triggering an automatic suspension of trading.
Russian forces fired missiles at several towns in Ukraine and landed troops on its shores today, officials and media said, after President Vladimir Putin authorized what he called a military operation special in the east.
European banks have the world’s most exposure to Russia – particularly those in France, Italy and Spain, which far exceed the exposure of US banks, according to data from the Bank for International Settlements.
German regulator BaFin said it was keeping a close eye on the crisis.
European Union leaders to impose new sanctions on Russia, freezing its assets, blocking its banks’ access to the European financial market and targeting ‘Kremlin interests’ over its ‘barbaric attack’ on Ukraine , senior officials announced today.
Deutsche Bank and Allianz – two of Europe’s largest financial firms and both operating in Russia – have said they are ready to comply with the sanctions.
Allianz, one of the world’s largest asset managers, said the share of Russian government bonds in its portfolio was “currently very low” and that it had recently implemented a freeze on such securities.
Deutsche Bank, like many lenders in recent years, has reduced its presence in Russia as sanctions against the country have widened.
“We have contingency plans in place,” the bank said in a statement. A spokesperson declined to give further details.
Shares of the lender fell more than 6.7%, one of the steepest declines among German blue chips.
Lloyds chief executive Charlie Nunn told reporters he was “on heightened alert internally about our cyber risk controls and we have been focusing on that for some time.”
Preparing for potential cyberattacks was discussed at a meeting between government and banking industry leaders on Russia on Wednesday, Nunn added.
Lloyds has been on heightened alert for “the past two months”, Nunn said.
Italian heavyweight Intesa Sanpaolo, which has financed major investment projects in Russia such as the “Blue Stream” gas pipeline or the sale of a stake in oil producer Rosneft, fell 4.8%.
While many bankers have downplayed the importance of Russia in their operations, Russia is closely tied to the European economy.
Russia is the European Union’s fifth-largest trading partner, with a 5% share of trade, according to the data. US trade with Russia is less than 1% of its total.
Some of the region’s top bankers have become more concerned about the potential side effects of the crisis.
The boss of HSBC, one of Europe’s biggest banks, said this week that “wider contagion” for global markets was concerning, even if the bank’s direct exposure was limited.