After the annexation of Crimea in 2014 and the sanctions that followed, many foreign lenders cut or reduced their exposure to Russia
Andrea Orcel, the boss of UniCredit, Italy’s biggest lender, joined several other Italian business executives in a videoconference with Vladimir Putin. During the meeting, which was held as scheduled despite the mobilisation of more than 100,000 Kremlin troops on the Ukrainian border, the Russian president reportedly told Mr Orcel and his colleagues that they should “feel as comfortable as possible about the Russian market”.
Those reassurances would . On February 24th, as Russian missiles struck Ukraine’s airports, military sites and other targets, and troops poured into the country from all sides, shares in UniCredit—which has more than 4,000 employees in Russia—tumbled by more than 13%. UniCredit is not the only bank caught in the crossfire. According to the Bank for International Settlements , a club of central banks, foreign lenders had outstanding claims of $121bn on Russian borrowers at the end of September. Italian and French banks each had $25bn of credit exposure to Russia; Austrian ones had $18bn. Thedata show that the stock of foreign loans to Russian businesses and households grew steadily for much of the 2000s, peaking at nearly $275bn in 2013. But after the annexation of Crimea in 2014, and the sanctions that followed, many foreign lenders cut or reduced their exposure to the country. Along with UniCredit, Raiffeisen Bank International from Austria and Société Générale from France are the European banks with the biggest Russian operations. The firms have enjoyed healthy profits there in recent years. In a report published in 2019 Société Générale touted its position as the leading international bank in Russia, citing revenue growth of 9%. According to Moody’s, a ratings agency, Raiffeisen’s Russian subsidiary accounted for 31% of the bank’s consolidated pre-tax profit in the first half of 2021, down from 47% in 2020. In its 2021 earnings report Raiffeisen stated it had €11.6bn in Russian loans on its books—11.5% of the total. As America and its allies roll out sanctions against Russia, these lenders will inevitably suffer some collateral damage. The latest set of punitive measures includes cutting some Russian banks off from SWIFT, a cross-border payments network, and restricting the central bank’s use of its $635bn stockpile of foreign reserves. Excluding Russia from SWIFT will make it harder for Western banks to collect payments on their loans. If the local economy tanks or the value of the, such loans will become even less viable. There is also the added risk that the investment-banking units of some big banks may suffer losses on securities linked to the Russian economy, or that wealth-management businesses are whacked by sanctions on Russian oligarchs. Western banks are significantly less exposed to Russia than they were a decade ago. But bank chiefs caution that broader financial contagion, though unlikely, cannot be ruled out. “It will depend on the severity of the conflict and the severity of the retaliation,” Noel Quinn, the chief executive of, recently told Reuters. Raiffeisen, which has set aside €150m of provisions for sanctions and geopolitical risk, including €46m for the Russia-Ukraine crisis, warned on February 28th that it is still too early to know what the fall-out will be. “The sanctions are being extended almost daily,” noted an official statement. “No final assessment can be given yet.”
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