The European Banking Authority (EBA) said on Friday that Ukraine’s war would initially have a limited impact on European banks, but the risks in the medium term are clear.
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“Direct risks posed by Russia’s invasion of Ukrainedoes not pose a significant threat to the European Union (EU) banking system, but the indirect effects could be much more pronounced, “the EBA report said.
EBA notes that the direct asset risk exposure of European banks to Russia, Ukraine and Belarus is concentrated in a few countries and in a limited number of banks.
However, the authority warns that this war could have more serious long-term consequences for banks in the European Economic Area – the EU, Iceland, Liechtenstein and Norway. Banks will be adversely affected by lower economic growth, which will reduce demand for loans.
In turn, the sanctions imposed on Western Russia and Belarus will hamper customers’ ability to service their bank loans, as will the response sanctions imposed by Moscow and Minsk.
