Huw Jones

LONDON, (Reuters) – Banks need to be cautious about fake news which could cause a run on deposits. This warning was issued by the European Union’s Banking Watchdog on Friday. It warned of potential consequences from the conflict in Ukraine.

The European Banking Authority stated in its most recent “risk dashboard” that market sentiment is still volatile, driven by news flows. Banks’ liquidity levels could become vulnerable to inaccurate information. This was a statement made by the European Banking Authority. It focused on Russia and Ukraine.

EBA stated that such campaigns spreading inaccurate information could lead to deposit outflows at targeted banks.

EBA reported that Russia is not a significant threat to financial stability. But, economic losses from cyber attacks and the war in Ukraine could impact the viability of lenders.

The fourth quarter of 2021 saw exposures by EU banks totalling 76 Billion Euros ($84 Billion) to Russia, 11 Billion euros to Ukraine, with the majority being made among French, Italian and Austrian creditors.

EBA stated that only Austrian and Hungarian bank reported greater than 2% of total exposures to Russia and Ukraine.

Graphic: EBA Russia Graphic – https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrqjowvm/EBA%20Russia%20Graphic.PNG

It stated that, “Based upon the EBA’s initial assessment,” direct exposures to Russia and Belarus are minimal. However, second-round effects could be more significant from a perspective of financial stability.

EBA stated that the second-round impacts include the direct economic impact from the war, such as the financial impact and sanctions. They also highlight the elevated cyber-attack risk, which has a longer-term effect on global supply chains.

EBA warned that rising interest rates could hurt banks’ ability to lend, as higher inflation or lower growth can lead to less lending.

EBA stated that banks in the EU maintained strong core capital levels at 15.4% as of the fourth quarter 2021.

Graphic: EBA Russia Graphic 2 – https://fingfx.thomsonreuters.com/gfx/mkt/xmvjoqjzzpr/EBA%20Russia%20Graphic%202.PNG

($1 = 0.9047 euros)