All large euro zone banks can withstand Russian write-off, ECB says

The logo of the European Central Bank is pictured outside its headquarters in Frankfurt
The logo of the European Central Bank (ECB) is pictured outside its headquarters in Frankfurt, Germany, December 8, 2016. REUTERS/Ralph Orlowski
  • Enria sees 75-90 bps avg hit for 9 most exposed banks
  • No bank would see capital reduced by more than 200 bps

FRANKFURT, April 20 (Reuters) - All large euro zone banks can withstand a full write-off of their Russian exposure and still respect their capital requirements, the European Central Bank's top supervisor Andrea Enria said in a letter published on Wednesday.

Russia's invasion of Ukraine and the ensuing Western sanctions have already forced the European units of some Russian banks out of business and caused some European lenders to leave Russia or consider such a move.

Enria said the exposure to Russia was concentrated in nine banks but even they could deal with a wipe-out of their direct cross-border ties to Russian counterparts and of the equity held in subsidiaries located in Russia.

"All banks involved would maintain sufficient headroom over the minimum and buffer requirements," Enria said in the letter to members of the European Parliament.

He said the nine banks would see their capital reduced by 70-95 basis points on average in the event of a wipe-out and for none of them the hit would be bigger than 200 basis points.

He added the ECB was closely monitoring banks' implementation of sanctions against Moscow and warned about indirect risks from the war, ranging from an economic slowdown resulting to volatility in the commodities market.

"Supervisors are in regular contact with the relevant banks to monitor their risk profiles, assess their reactions and identify any vulnerabilities at an early stage," Enria said.

The ECB supervises the euro zone's 115 largest banks.

Reporting By Francesco Canepa; Editing by Edmund Blair, William Maclean

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