Russia owes Western banks $120 billion. They won't get it back

Goldman Sachs said Thursday that it is “in the process of winding down its business in Russia in compliance with regulatory and licensing requirements.” JPMorgan Chase, the largest US bank, followed suit within hours, saying it was “actively working to break up” its Russian business.

The departures follow a stampede of Western banks over their exposure to Russia after President Vladimir Putin He ordered the invasion of Ukrainewhich led to the imposition of punitive sanctions covering most of the country’s financial system, including the Central Bank and major commercial lenders – VTB and Sberbank.

As exits come After Western companies fled from every other sector of the Russian economy, and rating agencies warned that a Russian default was imminent.

According to the Bank for International Settlements, which suspended Russia’s membership on Thursday, international banks owe more than $121 billion on Russian entities. European banks have more than $84 billion total claims, with France, Italy and Austria the most exposed, and US banks owe $14.7 billion.

Goldman Sachs (p) It previously disclosed it had exposure to Russia of $650 million in credit risk in December 2021. c. B. Morgan Chase (JPM) She said her current activities in Russia were “limited”.

Other banks that have more to lose may soon follow Goldman Sachs and JPMorgan Chase out of Russia. Kremlin spokesman Dmitry Peskov said Thursday that Russia’s economic situation is “absolutely unprecedented” and blamed the West for an “economic war”.

On Thursday, Putin expressed his support for the plans Confiscation of assets left behind by western companies that suspended or abandoned its operations in Russia.

Credit rating agency Fitch previously warned that “the asset quality of large Western European banks will come under pressure due to the fallout from Russia’s invasion of Ukraine,” and that their operations also face heightened risks as they race to comply with international sanctions.

French bank Societe Generale (SCGLF) It said last week that it “strictly adheres to all applicable laws and regulations and diligently implements the necessary measures to strictly enforce international sanctions as soon as they are announced.”

The bank said it had nearly $21 billion worth of dealings with Russia at the end of last year.

She said SocGen “has enough buffer to absorb the consequences of a potential extreme scenario, in which the group will be stripped of equity to its banking assets in Russia.”

France BNP Paribas (BNPQF) On Wednesday, it said its total exposure to both Russia and Ukraine is 3 billion euros ($3.3 billion).

Italia UniCredit (UNCFF), which has been in Russia since 1989, said last week that its Russian arm was “highly liquid and self-financed”, and that the franchise represented just 3% of the bank’s revenue. On Tuesday, it said its total exposure to Russia was 7.4 billion euros ($8.1 billion).

Credit Suisse (CS) On Thursday, it said it had 1 billion Swiss francs ($1.1 billion) exposure to Russia.

German Bank (DB) It said in a statement on Wednesday that it had “limited” exposure to Russia, with total loan exposure of 1.4 billion euros ($1.5 billion). The German bank said it has significantly reduced its exposure to Russia since 2014, with more measures taken over the past two weeks.

US banks may feel the pain, too. City Group (c) It revealed last week that it has nearly $10 billion in total exposure to Russia.

Mark Mason, the bank’s chief financial officer, told investors that the bank had run tests to assess consequences “under different types of stress scenarios.” He said the bank could lose nearly half of its exposure in a “risky” scenario.

Citi said on Wednesday it would stick with its plan to divest its retail banking business – but it could be very difficult to find a buyer given the political and economic climate.

“As we work toward this exit, we are managing that business on a more limited basis given current conditions and obligations,” she said in a statement. “With the Russian economy out of the global financial system as a result of the invasion, we continue to evaluate our operations in the country,” the statement added.

The European Central Bank addressed the risks to the banking sector on Thursday, saying that Europe’s financial system has sufficient liquidity and there are limited signs of tension.

“Russia is important in terms of energy markets, in terms of commodity prices, but in terms of the exposure of the financial sector and the European financial sector, Russia is not very relevant.” said Luis de Guindos, Vice President of the Central Bank.

He added that “the tensions and tensions that we have witnessed cannot be compared at all to what happened at the beginning of the epidemic.”