Thanks to its strong capital and liquidity position, Europe’s banking sector is “well prepared” to absorb the impact of Russia’s invasion of Ukraine, said Andrea Enria, chairman of the Single Supervisory Mechanism (SSM), the EU authority responsible for supervising large banks within the euro area banking union, on Thursday 31 March in a dialogue with the European Parliament’s Committee on Economic and Monetary Affairs.
Estimated at “€100 billion”, the direct exposure of EU banks to the few banks operating in Russia, Ukraine and/or Belarus appears “manageable”, Enria said. He reduced this to “€70 billion”, if one considers the exposure relative to the credit equivalent of the credit lines rather than the original value of the underlying assets. “And the sanctioned entities make up only a minor part of this total”, he said.
According to Mr Enria, even in the “extreme scenario” where European banks had to write down all cross-border exposures, the overall capital impact would not jeopardise their continued compliance with supervisory requirements and buffers.
The single banking supervisor is in close contact with the major banks in the euro area to ensure that they have the internal control mechanisms in place to comply with the international financial sanctions imposed on Russia and Belarus. It also assesses the potential indirect impact on the industry of its exposure to sanctioned companies and individuals, soaring and volatile energy prices, and cyber attacks.
Dismantling of Sberbank. Asked by Jonás Fernández (S&D, Spain) to draw lessons from the dismantling of Russian bank Sberbank’s European subsidiaries in a liquidity crisis (see EUROPE 12902/2), the chair of the Single Supervisory Mechanism said that resolution decisions had not been easy to take in a short timeframe, due to the complex legal structure of Sberbank’s former subsidiaries within the banking union.
“In the past, there was this concept that the public interest assessment should have been conducted only considering the EU systemic relevance. Now it is recognized that some banks may not have an EU relevance but can be very impactful on local markets. This is very positive”, noted Mr Enria.
The average size of Sberbank’s European subsidiaries allowed them to conduct their resolution process relying solely on national deposit guarantee schemes.
Nevertheless, Mr Enria considered the issue of financing to ensure the continuity of a failing bank's activities to be crucial, especially while the process of divesting the banking activities was being completed. In the meantime, having a European Deposit Insurance Scheme (EDIS) protecting depositors of all establishments would be providing “a much need layer of safety”, he said, again advocating the completion of the banking union. (Original version in French by Mathieu Bion)