This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.nytimes.com/2014/12/17/business/international/investors-fret-over-ripple-effects-of-ruble-crisis.html

The article has changed 2 times. There is an RSS feed of changes available.

Version 0 Version 1
Investors Fret Over Ripple Effects of Ruble Crisis Anxiety Over European Banks Amid Ruble Crisis
(34 minutes later)
FRANKFURT — On paper, the vulnerability of European banks to the sinking Russian ruble is manageable, less than their exposure to Greece during the height of the eurozone debt crisis.FRANKFURT — On paper, the vulnerability of European banks to the sinking Russian ruble is manageable, less than their exposure to Greece during the height of the eurozone debt crisis.
Try telling that to the traders this week. The ongoing rout of the ruble prompted a broader decline in emerging market currencies like the Turkish lira, which hit an all-time low on Monday before recovering slightly on Tuesday. The turmoil also clobbered shares of banks and other companies perceived as being vulnerable to Russia or the ruble.Try telling that to the traders this week. The ongoing rout of the ruble prompted a broader decline in emerging market currencies like the Turkish lira, which hit an all-time low on Monday before recovering slightly on Tuesday. The turmoil also clobbered shares of banks and other companies perceived as being vulnerable to Russia or the ruble.
“The direct effects are likely to be small,” Ben May, a senior eurozone economist at Oxford Economics in London, said of the ruble’s decline. “It’s more the uncertainty it creates.”“The direct effects are likely to be small,” Ben May, a senior eurozone economist at Oxford Economics in London, said of the ruble’s decline. “It’s more the uncertainty it creates.”
The ruble meltdown served to reawaken a host of other latent fears about the state of the eurozone economy, slower growth in emerging markets, and continuing violence in Ukraine.The ruble meltdown served to reawaken a host of other latent fears about the state of the eurozone economy, slower growth in emerging markets, and continuing violence in Ukraine.
“There is country-specific risk for Russia,” said Phyllis Papadavid, a foreign exchange strategist at BNP Paribas in London. “But there’s a larger story. There’s a weakness in global sentiment.”“There is country-specific risk for Russia,” said Phyllis Papadavid, a foreign exchange strategist at BNP Paribas in London. “But there’s a larger story. There’s a weakness in global sentiment.”
She pointed to a report on Tuesday suggesting that China’s manufacturing sector was losing steam.She pointed to a report on Tuesday suggesting that China’s manufacturing sector was losing steam.
The fear was amplified by the Russian central bank’s announcement in the dead of night that it would raise one of its main interest rates to 17 percent from 10.5 percent. The move, intended to make it more attractive to hold deposits in rubles, smacked of desperation and did not inspire confidence in Russian policy-making.The fear was amplified by the Russian central bank’s announcement in the dead of night that it would raise one of its main interest rates to 17 percent from 10.5 percent. The move, intended to make it more attractive to hold deposits in rubles, smacked of desperation and did not inspire confidence in Russian policy-making.
In afternoon trading, the Russian currency resumed its fall to record lows, with the dollar rising above 79 rubles in spite of the bank’s policy shift. On Monday, it had collapsed to 64 rubles to the dollar by the end of the day, its worst one-day sell-off since Russia defaulted on its debts in 1998.In afternoon trading, the Russian currency resumed its fall to record lows, with the dollar rising above 79 rubles in spite of the bank’s policy shift. On Monday, it had collapsed to 64 rubles to the dollar by the end of the day, its worst one-day sell-off since Russia defaulted on its debts in 1998.
Adding to the nervousness on Tuesday was the lack of precise, up-to-date information about which European banks might have large holdings of, say, Russian government debt. When the European Central Bank began its examination of the resilience of eurozone lenders at the beginning of the year, a ruble decline seemed like a remote possibility. Hardly anyone anticipated the steep fall in energy prices that would undercut the Russian economy.Adding to the nervousness on Tuesday was the lack of precise, up-to-date information about which European banks might have large holdings of, say, Russian government debt. When the European Central Bank began its examination of the resilience of eurozone lenders at the beginning of the year, a ruble decline seemed like a remote possibility. Hardly anyone anticipated the steep fall in energy prices that would undercut the Russian economy.
As a result, the European Central Bank did not include a ruble crisis among the hypothetical scenarios it used to test banks’ ability to withstand stress. Data released by the central bank in October following the bank review provide detailed information on individual banks’ exposure to the government debt of countries like Malta or Slovenia, but not Russia.As a result, the European Central Bank did not include a ruble crisis among the hypothetical scenarios it used to test banks’ ability to withstand stress. Data released by the central bank in October following the bank review provide detailed information on individual banks’ exposure to the government debt of countries like Malta or Slovenia, but not Russia.
The European Central Bank declined to comment on Tuesday, but a person with knowledge of its bank supervisory arm said that officials were closely monitoring banks that are exposed to the Russian economy or Russian debt.The European Central Bank declined to comment on Tuesday, but a person with knowledge of its bank supervisory arm said that officials were closely monitoring banks that are exposed to the Russian economy or Russian debt.
In the vacuum of public data, investors ganged up on banks and other companies known to have large Russian holdings. The targets included Raiffeisen Bank International in Vienna and the Danish brewer Carlsberg.In the vacuum of public data, investors ganged up on banks and other companies known to have large Russian holdings. The targets included Raiffeisen Bank International in Vienna and the Danish brewer Carlsberg.
Shares of Carlsberg, whose Baltika brand is the biggest selling beer in Russia, fell 7.5 percent. A Carlsberg spokesman declined to comment, except to refer to an earnings report published last month that described the Russian market as “difficult.” Shares of Raiffeisen Bank, which earned more than 70 percent of its pretax profit from its Russian subsidiary in the first nine months of this year, fell more than 8 percent on Tuesday.Shares of Carlsberg, whose Baltika brand is the biggest selling beer in Russia, fell 7.5 percent. A Carlsberg spokesman declined to comment, except to refer to an earnings report published last month that described the Russian market as “difficult.” Shares of Raiffeisen Bank, which earned more than 70 percent of its pretax profit from its Russian subsidiary in the first nine months of this year, fell more than 8 percent on Tuesday.
“All financials with exposure to Russia are currently suffering,” Ingrid Krenn-Ditz, a Raiffeisen spokeswoman, said in an email. “In Russia we continue to pursue a policy of selective underwriting” with a focus on customers, she added.“All financials with exposure to Russia are currently suffering,” Ingrid Krenn-Ditz, a Raiffeisen spokeswoman, said in an email. “In Russia we continue to pursue a policy of selective underwriting” with a focus on customers, she added.
Largely because of Raiffeisen and Bank Austria, a unit of the Italian bank UniCredit, Austria is the eurozone country most exposed to tumult in Russia. The maximum potential loss is about 4 percent of Austrian gross domestic product, according to Oxford Economics.Largely because of Raiffeisen and Bank Austria, a unit of the Italian bank UniCredit, Austria is the eurozone country most exposed to tumult in Russia. The maximum potential loss is about 4 percent of Austrian gross domestic product, according to Oxford Economics.
French bank exposure to Russia is about 2 percent of G.D.P., according to figures from 2013, while for Italy the figure is about 1 percent. For Germany, Spain and most other eurozone countries, the exposure is well below 1 percent of G.D.P.French bank exposure to Russia is about 2 percent of G.D.P., according to figures from 2013, while for Italy the figure is about 1 percent. For Germany, Spain and most other eurozone countries, the exposure is well below 1 percent of G.D.P.
In a report in October, the Bank of France estimated that the country’s largest banks had loans and other investments in Russia of 47.3 billion euros, or $59.2 billion, at the end of 2013, a substantial sum but far less than their exposure to Western European countries like Switzerland or Belgium.In a report in October, the Bank of France estimated that the country’s largest banks had loans and other investments in Russia of 47.3 billion euros, or $59.2 billion, at the end of 2013, a substantial sum but far less than their exposure to Western European countries like Switzerland or Belgium.
“If you compare those exposures to exposures to Greece at the worst of the crisis, banks are much less exposed to Russia,” Mr. May of Oxford Economics said. He noted, however, that there was no comprehensive recent data.“If you compare those exposures to exposures to Greece at the worst of the crisis, banks are much less exposed to Russia,” Mr. May of Oxford Economics said. He noted, however, that there was no comprehensive recent data.
Investors were clearly worried about some individual institutions. Shares of Société Générale in France suffered the biggest losses in the Euro Stoxx 50 index on Tuesday, falling 4.7 percent. Société Générale owns Rosbank, a major lender based in Moscow, as well as two smaller Russian financial institutions, DeltaCredit and Rusfinance Bank. Société Générale declined to comment Tuesday.Investors were clearly worried about some individual institutions. Shares of Société Générale in France suffered the biggest losses in the Euro Stoxx 50 index on Tuesday, falling 4.7 percent. Société Générale owns Rosbank, a major lender based in Moscow, as well as two smaller Russian financial institutions, DeltaCredit and Rusfinance Bank. Société Générale declined to comment Tuesday.
Deutsche Bank shares fell 2.6 percent. That bank, based in Frankfurt, has loans outstanding to Russian customers of €5.2 billion euros, nearly 1 percent of its total credit exposure. Ronald Weichert, a Deutsche Bank spokesman, said the bank was confident it could manage the impact of a ruble crisis.Deutsche Bank shares fell 2.6 percent. That bank, based in Frankfurt, has loans outstanding to Russian customers of €5.2 billion euros, nearly 1 percent of its total credit exposure. Ronald Weichert, a Deutsche Bank spokesman, said the bank was confident it could manage the impact of a ruble crisis.
Emerging market currencies also suffered as the turmoil in Russia called attention to their economic and political weaknesses.Emerging market currencies also suffered as the turmoil in Russia called attention to their economic and political weaknesses.
The Turkish lira fell to an all-time low of about $0.42 on Monday, though it rose slightly on Tuesday. Investors were unnerved not only by Turkey’s proximity to Russia but also by the threat of political instability after a new wave of repression against opponents of the Turkish president, Recep Tayyip Erdogan.The Turkish lira fell to an all-time low of about $0.42 on Monday, though it rose slightly on Tuesday. Investors were unnerved not only by Turkey’s proximity to Russia but also by the threat of political instability after a new wave of repression against opponents of the Turkish president, Recep Tayyip Erdogan.
“There is just no way that an intertwined European economy can believe it is isolated from all this negative spillover,” currency market analysts at Commerzbank in Frankfurt said in a note to clients on Tuesday, “especially at a time when the eurozone has its own issues to deal with.”“There is just no way that an intertwined European economy can believe it is isolated from all this negative spillover,” currency market analysts at Commerzbank in Frankfurt said in a note to clients on Tuesday, “especially at a time when the eurozone has its own issues to deal with.”
David Jolly contributed reporting from Paris and Jennifer Anderson from London.David Jolly contributed reporting from Paris and Jennifer Anderson from London.