Gustavo Medeiros, head of global macro research at emerging-markets investor Ashmore, said there’s a risk of a massive liquidity shock.
“If Russian banks cannot recover their claims or pay their liabilities to the rest of the world the global financial system may experience shockwaves of liquidity events (since unpaid transactions beget more failures), potentially leading to a liquidity crisis compared with the liquidity shock in March 2020 or even the default of Lehman Brothers in 2008,” he said in a note to clients.
Financial markets, however, are not pricing in such a scenario.
So far, the major destructive effect on my portfolio has been the vaporizing of the less than 1% I had in Lukoil - annoying, but not fatal (and offset by rise in Aussie/Brazilian miners).
Fitch Ratings warned on Wednesday 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.
Where’s the weakness? Fitch said it mostly comes down to corporate and investment banking operations as well as investment portfolios. There are concerns that entities affected by sanctions won’t be able to repay loans, forcing the banks to write some of them off.
Sanctions compliance, especially with some top Russian banks excluded from the SWIFT global payment system, will also pose a challenge, Fitch said.
In a statement on Thursday, Societe Generale said that it is “rigorously complying with all applicable laws and regulations and is diligently implementing the measures necessary to strictly enforce international sanctions as soon as they are made public.”
So far, the major destructive effect on my portfolio has been the vaporizing of the less than 1% I had in Lukoil
The knee-jerk reaction to sell Russian stocks seems about as sensible as pouring out vodka that’s already been paid for. Maybe the idea is to demoralize Russians as they see their stock quotes decline. But in practice, it’s just giving rich Russians an opportunity to buy up assets on the cheap. I hate Putin as much as most of the free world does, but I’d prefer we stay rational in our sanctioning of him.
he knee-jerk reaction to sell Russian stocks seems about as sensible as pouring out vodka that’s already been paid for. Maybe the idea is to demoralize Russians as they see their stock quotes decline. But in practice, it’s just giving rich Russians an opportunity to buy up assets on the cheap. I hate Putin as much as most of the free world does, but I’d prefer we stay rational in our sanctioning of him.