As sanctions imposed on Russia continuously raise questions on the global implications of potentially separating Russia from international financing, US banks are quickly assessing their exposures to Russia. According to Gerard Cassidy, Capital Markets Managing Director, RBC, the exposure is minimal due to the limited dealings Russia has with US organizations, so the risk of economic collapse is small.
According to reports, some have questioned the potential impact on the economies of the G20 countries as Russian banks (and the country's central bank) are locked out of the global banking system. The country is already suffering from sanctions, with the Russian ruble falling more than 25% against the US dollar.
Citigroup stated on Monday that it was exposed to about US $10 billion in loans, sovereign debt and other assets related to Russia. The company's total assets exceed $2 trillion. Additionally, Citi reported that it will continue to monitor the current geopolitical and economic conditions of Russia and Ukraine, reducing risk and exposure as needed. The annual declarations of JPMorgan Chase and Bank of America did not list Russia in the top 20 international markets by exposure. Wells Fargo, a more domestically focused company than the other three major banks, also did not mention Russia in its annual filings. However, there are forms of indirect exposure to Russia that have affected recent financial stability negotiations, such as blocking Russia from SWIFT and the US blocking transactions with the Central Bank of Russia.
Kenneth Rogoff, former chief economist, International Monetary Fund, commented that the downturn in the Russian economy is unlikely to lead to a financial crisis in the United States. According to World Bank, Russia is the 11th largest economy in the world by GDP.
However, some have expressed concern that this could prove similar to previous global events, such as Lehman Brothers, where the collapse of a major bank caused a global financial crisis. Sberbank and VTB, two of Russia’s largest banks, combine approximately $750 billion in assets, with branches in Central and Eastern Europe. Zoltan Pozsar, Credit Suisse, stated that companies around the world could face significant settlement risks as Russia and its banks vie for the US dollar.
Pozsar commented that a bank's inability to make a payment because it has been excluded from SWIFT is the same as Lehman's inability to make a payment because the clearing bank does not want to send the payment on behalf of the bank. However, Cassidy stated that the global financial conditions are stronger today than during the Lehman case, as the US banking system has more than twice the amount of capital liquidity following the financial crisis.
Like this item? Get our Weekly Update newsletter. Subscribe today