Investors Count the Rising Toll Of Stranded Assets

Foreign investors' exposure to stranded assets because of sanctions on Russia amounts to $120 billion, and that number could rise.

Investors Count the Rising Toll Of Stranded Assets

As sanctions imposed on Russia raise questions about the global implications of isolating Russia out of international financing, global companies, banks, and investors are counting the tolls of stranded assets.

According to the Bank of International Settlements data, total foreign banks' exposure to Russia amounts to $120 billion, and that number could rise. In Europe, Italian and French banks have the largest Russian exposure, representing just over $25 billion each at the end of September, the data says. The exposure of U.S. banks totals $14.7 billion, according to BIS data.

U.S banks are auditing their exposures to Russia

On Monday, Citigroup revealed that as of the end of 2021 its exposure to Russia was about $10 billion in loans, government debt, and other assets linked to Russia, which is a small share of over $2 trillion of the bank's total assets. As a comparison, Goldman Sachs Group Inc GS.N reported in a filing last month $293 million in net exposure to Russia, as well as a total of $414 million of market exposure as of December 2021. For JPMorgan Chase (JPM) and Bank of America (BAC), Russia is not even among the top 20 markets where they do business.

However, limited exposure does not mean zero exposure. Even if Russia barely appears directly on U.S. banks’ balance sheets, it is the losses from sanctions incurred by the correspondent European banks that can then spill over to the US and create a ripple effect.

J.P. Morgan analyst Kian Abouhossein wrote in a research note that "transparency on exposure by banks to Russia is low." He also added that "most banks do not give net exposures, and do not provide granularity around the gross exposures."

Also, according to the most recent portfolio information available to Morningstar from disclosures by asset managers like Capital Group, Black Rock, and Vanguard, from September 2021 through to Feb. 25, 2022, overseas investments in Russia's stocks and bonds through the top 100 open-end funds and exchange-traded funds worldwide totaled $60 billion.