Goldman Sachs said Thursday that it is “winding down its business in Russia in compliance with regulatory and licensing requirements.” JPMorgan Chase, America’s largest bank, followed within hours, saying it was “actively unwinding” its Russian business.
The exits also come after a stampede of Western businesses out of just about every other sector of Russia’s economy, and as ratings agencies warn that a Russian debt default is imminent.
International banks are owed more than $121 billion by Russian entities, according to the Bank for International Settlements, which suspended Russia’s membership on Thursday. European banks have over $84 billion total claims, with France, Italy and Austria the most exposed, and US banks owed $14.7 billion.
Other banks with more to lose could soon follow Goldman Sachs and JPMorgan Chase out of Russia. Kremlin spokesperson Dmitry Peskov said Thursday that the economic situation in Russia is “absolutely unprecedented” and blamed the West for an “economic war.”
Fitch Ratings previously warned that “large western European banks’ asset quality will be pressured by the fallout from Russia’s invasion of Ukraine,” and that their operations also face increased risk as they race to comply with international sanctions.
The bank said it had almost $21 billion in exposure to Russia at the end of last year.
Societe Generale “has more than enough buffer to absorb the consequences of a potential extreme scenario, in which the group would be stripped of property rights to its banking assets in Russia,” it said.
Mark Mason, the bank’s chief financial officer, told investors that the bank has been performing tests to evaluate the consequences “under different stress type of scenarios.” He said the bank could lose roughly half its exposure in a “severe” scenario.
Citi said Wednesday that it would stick to its plan of exiting its consumer banking business — but it might be very hard to find a buyer given the political and economic climate.
“As we work toward that exit, we are operating that business on a more limited basis given current circumstances and obligations,” it said in a statement. “With the Russian economy in the process of being disconnected from the global financial system as a consequence of the invasion, we continue to assess our operations in the country,” it added.
The European Central Bank addressed the risk to the banking sector on Thursday, saying that Europe’s financial system has enough liquidity and there were limited signs of stress.
“Russia is important in terms of energy markets, in terms of commodity prices, but in terms of the exposure of the financial sector, of the European financial sector, Russia is not very relevant.” said Luis de Guindos, vice president of the central bank.
“The strains and the tensions that we have seen are not comparable at all to what happened at the beginning of the pandemic,” he added.