The European Central Bank (ECB) told lenders active in Russia to report on the risks they face amid Moscow’s tensions with Ukraine, according to a Bloomberg report Wednesday citing people familiar with the matter.
The ECB is telling the lenders to assess risks from a range of diplomatic and military scenarios, including further economic sanctions as well as the real-world consequences of an invasion, sources said.
They said that the Frankfurt-based bank is working with the lenders to assess risks to their liquidity, loan books, trading and currency positions as well as their ability to maintain the operations.
Further escalating the tensions, Russian President Vladimir Putin late on Monday ordered a "peacekeeping operation" in Ukraine's Luhansk and Donetsk regions after recognizing the separatist regions' independence, paving the way to provide them more military support – a direct challenge to the West that will fuel fears that Russia could imminently invade Ukraine.
Moscow denies such invasion plans.
Putin’s move was followed by an immediate sanction by Western nations, including those by the U.S. that targeted Russian financial institutions and Germany’s halting Nord Stream 2 natural gas pipeline.
Several European banks, including France’s Societe Generale SA, Italy’s UniCredit and Austria’s Raiffeisen Bank International AG are still among the largest European banks in the country, the data from the European Banking Authority shows.
The sources further stressed that the ECB and lenders are still analyzing the effect of sanctions that are being put in place, adding that the central bank had already identified the lenders most exposed to Russia and Ukraine and is looking at potential sources of risk.