Russia owes $120 billion to Western banks. they won’t get it back

The Wall Street giant said on Thursday that it is “closing its business in Russia in compliance with regulatory and licensing requirements,” a Goldman Sachs spokesperson said.

The departure follows a scramble by Western banks to match their exposure to Russia after President Vladimir Putin Ordered invasion of UkraineTriggering punitive sanctions covering much of the country’s financial system, including its central bank and top commercial lenders – VTB and Sberbank.

It also comes after a stampede of Western businesses in nearly every other sector of Russia’s economy, and as rating agencies warned 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 total claims of more than $84 billion, with France, Italy and Austria being the most exposed, and US banks owed $14.7 billion.

Goldman Sachs ,gs, previously disclosed that Russia had a credit exposure of $650 million in December 2021.

Other banks losing more may soon follow Goldman Sachs from Russia. Kremlin spokesman Dmitry Peskov said on Thursday that the economic situation in Russia is “absolutely unprecedented” and blamed the West for an “economic war”. Moscow has promised to retaliate for the sanctions, and some banks have suggested their assets could be confiscated or nationalized by the Kremlin.

Fitch Ratings previously warned that “the fallout from Russia’s invasion of Ukraine will put pressure on the asset quality of large Western European banks,” and that their operations are at increased risk as they race to comply with international sanctions. .

french bank Societe Generale ,SCGLF, Last week it said it was “strictly following all applicable laws and regulations and implementing measures necessary to strictly enforce international sanctions as soon as they are made public.”

The bank said it had about $21 billion in contacts with Russia at the end of last year.

Societe Generale has “more than enough buffer to absorb the consequences of a potentially extreme scenario in which the group would be stripped of its property rights to its banking assets in Russia,” it said.

French BNP Paribas ,BNPQF, Its risk to both Russia and Ukraine is €3 billion ($3.3 billion), it said on Wednesday.
Italian unicredit ,UNCFF,, which has been operating in Russia since 1989, said last week that its Russian branch was “very liquid and self-funded”, and that franchises account for just 3% of the bank’s revenue. On Tuesday, it said its exposure to Russia is about €7.4 billion ($8.1 billion).
Swiss Credit ,cs, On Thursday it said it had investments of 1 billion Swiss francs ($1.1 billion) in Russia.
Deutsche Bank ,database, said in a statement on Wednesday it had “limited” exposure to Russia, which has a gross credit exposure of €1.4 billion ($1.5 billion). The German lender said it has significantly reduced its exposure to Russia since 2014, with further action in the past two weeks.
US banks can feel the pain, too. Citigroup ,C, It disclosed last week that it had about $10 billion in total exposure to Russia.

The bank’s chief financial officer Mark Mason told investors that the bank is conducting tests to evaluate the results “under a variety of scenarios.” He said the bank could lose nearly half of its exposure in a “severe” scenario.

Citi said on Wednesday it would stick to its plan to exit its consumer banking business – but finding a buyer could be very difficult given the political and economic climate.

“As we work toward that exit, we are operating that business on a more limited basis given the current circumstances and obligations,” it said in a statement. “In the process of being separated from the global financial system as a result of the invasion of the Russian economy, we continue to assess our actions in the country,” it added.

The European Central Bank addressed risks to the banking sector on Thursday, saying Europe’s financial system has sufficient 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 performance of the European financial sector’s financial sector, Russia is not very relevant.” Luis de Guindos, vice president of the central bank, said.

“The tension and stress we have seen cannot be compared to what happened at the start of the pandemic,” he said.