LONDON, Dec 28 (Reuters) – Ship insurers said they are cancelling war risk cover across Russia, Ukraine and Belarus, following an exit from the region by reinsurers in the face of steep losses.
Reinsurers, who insure the insurers, typically renew their 12-month contracts with insurance clients on Jan. 1, giving them the first opportunity to scale back exposure since the war in Ukraine started, after being hit this year by losses related to the conflict and from Hurricane Ian in Florida.
P&I (protection and indemnity) clubs American, North, UK and West are no longer able to offer war risk cover for some liabilities in the region from Jan. 1, they said in recent notices on their websites. The clubs are among the biggest P&I insurers who cover around 90% of the world’s ocean-going ships.
UK P&I Club said on Dec. 23 that the issue had arisen because of a lack of availability of reinsurance for reinsurers, also known as retrocession.
“The Club’s reinsurers are no longer able to secure reinsurance for war risk exposure to Russian, Ukrainian or Belarus territorial risks,” it said.
American P&I said on Dec. 23 that it had received a “notice of cancellation” for the region from its war risk reinsurers and was cancelling its own insurance as a result.
Ships typically have P&I insurance, which covers third-party liability claims including environmental damage and injury. Separate hull and machinery policies cover vessels against physical damage.
The withdrawal of cover for Ukraine and Russia applies to some but not all types of policy offered by the P&I clubs, three P&I insurance sources said.
“This is being driven by reinsurance,” said Stephen Rebair, deputy global director, underwriting at North, adding that reinsurers were limiting their exposure to the region and “those exclusions have to be passed down the line”.
The exclusions will make it harder for charterers to find insurance, increase prices and may mean some ships sail uninsured, industry sources say.
Providers of reinsurance and retrocession include global players Hannover Re (HNRGn.DE), Munich Re (MUVGn.DE) and Swiss Re (SRENH.S), as well as syndicates in the Lloyd’s of London (SOLYD.UL) market. The firms all declined to comment.
Reuters reported earlier this month that a proposed contract clause being circulated by reinsurers excluded war-related claims for both planes and ships in Ukraine, Russia and Belarus.
The Japanese government has urged insurers to take on additional risks to continue providing marine war insurance for liquefied natural gas (LNG) shippers in Russian waters, a senior official at the industry ministry said this week.
Reporting by Carolyn Cohn and Jonathan Saul in London
Editing by Muralikumar Anantharaman and Matthew Lewis
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Dec 19 (Reuters) – Insurers are denying or limiting coverage to clients with exposure to bankrupt crypto exchange FTX, leaving digital currency traders and exchanges uninsured for any losses from hacks, theft or lawsuits, several market participants said.
Insurers were already reluctant to underwrite asset and directors and officers (D&O) protection policies for crypto companies because of scant market regulation and the volatile prices of Bitcoin and other cryptocurrencies.
Now, the collapse of FTX last month has amplified concerns.
Specialists in the Lloyd’s of London (SOLYD.UL) and Bermuda insurance markets are requiring more transparency from crypto companies about their exposure to FTX. The insurers are also proposing broad policy exclusions for any claims arising from the company’s collapse.
Kyle Nichols, president of broker Hugh Wood Canada Ltd, said insurers were requiring clients to fill out a questionnaire asking whether they invested in FTX, or had assets on the exchange.
Lloyd’s of London broker Superscript is giving clients that dealt with FTX a mandatory questionnaire to outline the percentage of their exposure, said Ben Davis, lead for digital assets at Superscript.
“Let’s say the client has 40% of their total assets at FTX that they can’t access, that is either going to be a decline or we’re going to put on an exclusion that limits cover for any claims arising out of their funds held on FTX,” he said.
The exclusions denying payout for any claims arising out of the FTX bankruptcy are found in insurance policies that cover the protection of digital assets and for personal liabilities of directors and officers of companies that deal in crypto, five insurance sources told Reuters. A couple of insurers have been pushing for a broad exclusion to policies for anything related to FTX, a broker said.
Exclusions may act as a failsafe for insurers, and will make it even more difficult for companies that are seeking coverage, insurers and brokers said.
Bermuda-based crypto insurer Relm, which previously has provided coverage to entities linked to FTX, takes an even stricter approach.
“If we have to include a crypto exclusion or a regulatory exclusion, we’re just not going to offer the coverage,” said Relm co-founder Joe Ziolkowski.
D&O QUESTION
Now, one of the most pressing questions is whether insurers will cover D&O policies at other companies that had dealings with FTX, given the problems facing exchange’s leadership, Ziolkowski said.
U.S. prosecutors say former FTX Chief Executive Officer Sam Bankman-Fried engaged in a scheme to defraud FTX’s customers by misappropriating their deposits to pay for expenses and debts and to make investments on behalf of his crypto hedge fund, Alameda Research LLC.
A lawyer for Bankman-Fried said on Tuesday his client is considering all of his legal options.
D&O policies, which are used to pay legal costs, do not always pay out in cases of fraud.
Insurance sources would not name their clients or potential clients that could be affected by policy changes, citing confidentiality. Crypto firms with financial exposure to FTX include Binance, a crypto exchange, and Genesis, a crypto lender, neither of which responded to e-mails seeking comment.
While the least risky parts of the crypto market, such as companies that own cold wallets storing assets on platforms not connected to the internet, may get cover for up to $1 billion, a D&O insurance policyholder’s cover may now be limited to tens of millions of dollars for the rest of the market, Ziolkowski said.
The FTX collapse will also likely lead to a rise in insurance rates, especially in the U.S. D&O market, insurers said. The rates are already high because of the perceived risks and lack of historical data on cryptocurrency insurance losses.
A typical crime bond — used to protect against losses resulting from a criminal act — would cost $30,000 to $40,000 per $1 million of coverage for a digital assets trader. That compares with a cost of about $5,000 per $1 million for a traditional securities trader, Hugh Wood Canada’s Nichols said.
Reporting by Noor Zainab Hussain in Bengaluru and Carolyn Cohn in London; Editing by Lananh Nguyen and Anna Driver
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Turkey says out of question to take insurance risk
Yellen says oil from Kazakhstan should not be targeted
Ankara says most of waiting ships are EU vessels
ISTANBUL, Dec 9 (Reuters) – The number of oil tankers waiting in the Black Sea to pass through Istanbul’s Bosphorus Strait on the way to the Mediterranean rose to 20 on Friday, Tribeca shipping agency said, as Turkey held talks to resolve an insurance dispute behind the build-up.
Dismissing pressure from abroad over the lengthening queue, Turkey’s maritime authority said on Thursday it would continue to block oil tankers that lacked the appropriate insurance letters, and it needed time for checks.
The ship backlog is creating growing unease in oil and tanker markets and comes as the G7 and European Union introduce a price cap on Russian oil. Millions of barrels of oil per day move south from Russian ports through Turkey’s Bosphorus and Dardanelles straits into the Mediterranean.
The maritime authority said that in the event of an accident involving a vessel in breach of sanctions it was possible the damage would not be covered by an international oil-spill fund.
“(It) is out of the question for us to take the risk that the insurance company will not meet its indemnification responsibility,” it said, adding that Turkey was continuing talks with other countries and insurance companies.
It said the vast majority of vessels waiting near the straits were EU vessels, with a large part of the oil destined for EU ports – a factor frustrating Ankara’s Western allies.
The G7 group of nations, the EU and Australia have agreed to bar providers of shipping services, such as insurers, from helping to export Russian oil unless it is sold at an enforced low price, or cap, aimed at depriving Moscow of wartime revenue.
However, Turkey has had a separate measure in force since the start of the month requiring vessels to provide proof of insurance covering the duration of their transit through the Bosphorus strait, or when calling at Turkish ports.
KAZAKH OIL
Eight tankers were also waiting for passage through the Dardanelles strait into the Mediterranean, down from nine a day earlier, Tribeca said, making a total of 28 tankers waiting for southbound passage.
Most of the tankers waiting at the Bosphorus are carrying Kazakh oil and Treasury Secretary Janet Yellen said on Thursday the U.S. administration saw no reason that such shipments should be subjected to new procedures.
Washington had no reason to believe Russia was involved in Turkey’s decision to block ship transits, she added.
Turkey has had to balance its good relations with both Russia and Ukraine since Moscow invaded its neighbour in February. It played a key role in a United Nations-backed deal reached in July to free up grain exports from Ukrainian Black Sea ports.
Turkey’s maritime authority said that it was unacceptable to pressure Turkey over what it said were “routine” insurance checks and that it could remove tankers without proper documentation from its waters or require them to furnish new P&I ship insurance letters covering their journeys.
Reporting by Daren Butler, Can Sezer, and Jonathan Saul in London
Editing by Himani Sarkar, Clarence Fernandez, Jonathan Spicer and Frances Kerry
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NEW YORK/MUNICH, May 17 (Reuters) – Germany’s Allianz SE (ALVG.DE) agreed to pay more than $6 billion and its U.S. asset management unit will plead guilty to criminal securities fraud over the collapse of its Structured Alpha funds early in the COVID-19 pandemic.
Allianz’s settlements with the U.S. Department of Justice and U.S. Securities and Exchange Commission are among the largest in corporate history, and dwarf earlier corporate settlements obtained under President Joe Biden’s administration.
Gregoire Tournant, the former chief investment officer who created and oversaw the now-defunct Structured Alpha funds, is also being indicted for fraud, conspiracy and obstruction, while two portfolio managers entered related guilty pleas.
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Once with more than $11 billion of assets under management, the Structured Alpha funds lost more than $7 billion as the spread of COVID-19 roiled markets in February and March 2020.
Prosecutors said Allianz Global Investors US LLC misled teacher pension funds, clergy, bus drivers, engineers and other investors by understating the funds’ risks, and displayed “significant gaps” in its monitoring of the funds. read more
Investors were told the funds employed options that included hedges to protect against market crashes, but prosecutors said the fund managers repeatedly failed to buy those hedges.
The managers also inflated fund performance to boost their own pay, collecting 30% of excess returns over relevant benchmarks as a performance fee, prosecutors said.
Tournant’s pay was the highest or second-highest in his unit from 2015 to 2019, including $13 million in 2019, court papers show.
At a news conference, U.S. Attorney Damian Williams in Manhattan said more than 100,000 investors were harmed, and that while U.S. prosecutors rarely bring criminal charges against companies it was “the right thing to do.”
Investors “were promised a relatively safe investment with strict risk controls designed to weather a sudden storm, like a massive collapse in the stock market,” he said. “Those promises were lies…. Today is the day for accountability.”
BLAME COVID, DEFENDANT’S LAWYERS SAY
Also known for its insurance operations, Allianz is among Germany’s most recognizable brands and an Olympic sponsor.
Its namesake arena near its Munich headquarters, meanwhile, houses Bayern Munich, one of world’s best-known soccer teams.
Tuesday’s settlement calls for Allianz to pay a $2.33 billion criminal fine, make $3.24 billion of restitution and forfeit $463 million, court papers show.
Williams said the fine was significantly reduced because of the compensation Allianz offered to investors.
Even so, the payout is close to twice the $3.3 billion that the Justice Department collected in corporate penalties for all of 2021.
Allianz also agreed to a $675 million civil fine to settle with the SEC, one of that regulator’s largest penalties since the implosions of Enron Corp and WorldCom Inc two decades ago.
The company previously set aside enough money to cover the settlement. While the debacle had frustrated shareholders and prompted some top Allianz managers to cut their own pay, the group’s shares closed up 1.7% in Germany after the total payout broadly matched its provisions.
Two former Structured Alpha portfolio managers, Stephen Bond-Nelson and Trevor Taylor, agreed to plead guilty to fraud and conspiracy charges and entered cooperation agreements.
Tournant, who joined Allianz in 2002 and founded the funds three years later, surrendered to authorities on Tuesday morning in Denver, and according to his lawyers will fight the charges.
“Greg Tournant has been unfairly targeted,” his lawyers Seth Levine and Daniel Alonso said in a joint statement. “We have faith that the justice system will reject this meritless and ill-considered attempt by the government to criminalize the impact of the unprecedented, COVID-induced market dislocation.”
Lawyers for Bond-Nelson and Taylor declined immediate comment.
VOYA PARTNERSHIP
Allianz’s guilty plea carries a 10-year ban on Allianz Global Investors’ providing advisory services to U.S.-registered investment funds.
As a result, Allianz agreed to move about $120 billion of investor assets to Voya Financial Inc (VOYA.N), in exchange for up to a 24% stake in Voya’s investment management unit.
Regulators said the misconduct included a situation where he and Bond-Nelson altered more than 75 risk reports before sending them to investors, to reduce projected losses in market-stress scenarios.
The SEC said projected losses in one market crash scenario were changed to 4.15% from the actual 42.15%, simply by removing the “2.”
Allianz’s alleged oversight lapses included a failure to ensure that Tournant was using his promised hedges, though only people in his group knew of the misconduct before March 2020.
“No compliance system is perfect, but the controls at AGI didn’t even stand a chance,” Williams said.
Bond-Nelson, at Tournant’s direction, also lied to Allianz’s in-house lawyers after the company learned about the altered reports and the SEC probe, prosecutors added.
“Unfortunately, we’ve seen a recent string of cases in which derivatives and complex products have harmed investors across market sectors,” SEC Chair Gary Gensler said in a statement.
Investors have also filed more than two dozen lawsuits against Allianz over the Structured Alpha funds.
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Reporting by Jonathan Stempel in New York and Tom Sims and Alexander Huebner in Munich; Additional reporting by Luc Cohen in New York; Editing by Chizu Nomiyama and Tomasz Janowski
Our Standards: The Thomson Reuters Trust Principles.
OMAHA, Neb., April 30 (Reuters) – Warren Buffett on Saturday used the annual meeting of Berkshire Hathaway Inc (BRKa.N) to reveal major new investments including a bigger stake in Activision Blizzard Inc (ATVI.O), while also railing against Wall Street excess and addressing the risks to his conglomerate of inflation and nuclear war.
The meeting in downtown Omaha, Nebraska was Berkshire’s first welcoming shareholders since 2019, before COVID-19 derailed America’s largest corporate gathering for two years.
It allowed shareholders to ask five hours of questions directly to Buffett and Vice Chairman Charlie Munger, and some questions to Vice Chairmen Greg Abel, who would become chief executive if Buffett could not serve, and Ajit Jain.
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Buffett said Berkshire, long faulted for holding too much cash, boosted its combined stakes in oil company Chevron Corp (CVX.N) and “Call of Duty” game maker Activision Blizzard Inc (ATVI.O) nearly six-fold to more than $31 billion. read more
Berkshire also said first-quarter operating profit was little changed at $7.04 billion, as many of its dozens of businesses withstood supply chain disruptions caused by COVID-19 variants, the Ukraine invasion and rising costs from inflation. read more
Buffett, 91, said it “really feels good” to address shareholders in person, after holding the last two meetings without them. Attendees included JPMorgan Chase & Co (JPM.N) Chief Executive Jamie Dimon and the actor Bill Murray.
Buffett had in his annual shareholder letter in February bemoaned the lack of investment opportunities.
That prompted a shareholder to ask what changed in March, when Berkshire bought 14.6% of Occidental Petroleum Corp (OXY.N) and agreed to buy insurer Alleghany Corp (Y.N) for $11.6 billion.
Buffett said it was simple: he turned to Occidental after reading an analyst report, and to Alleghany after its chief executive, who once led Berkshire’s General Re business, wrote to him.
“Markets do crazy things, and occasionally Berkshire gets a chance to do something,” he said. “It’s not because we’re smart…. I think we’re sane.”
Berkshire spent $51 billion on equities in the quarter, and its cash stake sank more than $40 billion to $106 billion.
But the conglomerate has many cash-generating resources, including its insurance operations, and Buffett assured that reserves won’t run dry.
“We will always have a lot of cash,” he said. “It’s like oxygen, it’s there all the time but if it disappears for a few minutes, it’s all over.”
Buffett and Jain stumbled for answers when asked about whether the Ukraine conflict could degenerate into nuclear war.
Jain, who has drawn Buffett’s praise for decades, said he had a “lack of ability” to estimate Berkshire’s insurance exposure.
Buffett added that there was a “very, very, very low” risk of a nuclear attack, though the world had “come close” during the 1962 Cuban Missile Crisis.
“The world is flipping a coin every day,” Buffett said. “Berkshire does not have an answer.”
Buffett also picked on a favored target in saying stock markets sometimes resembled a casino or gambling partner.
“That existed to an extraordinary degree in the last couple of years, encouraged by Wall Street,” he said.
For his part, Munger, 98, echoed Nancy Reagan in criticizing bitcoin, saying that if an advisor suggested you put your retirement account there, “just say no.” Munger also criticized trading firm Robinhood Markets Inc. (HOOD.O) read more
He and Buffett munched their familiar candies from See’s, which Berkshire owns, and drank soda from Coca-Cola, a big Berkshire investment, at the meeting.
Abel defended Berkshire’s BNSF railroad, saying there was “more to be done” to improve operations and customer service, and compete against rival Union Pacific Corp (UNP.N).
Buffett also said Berkshire is designed to assure shareholders that the company and its business culture will survive his and Munger’s departures.
“Berkshire is built forever,” he said.
Shareholders also rejected proposals requiring Berkshire to disclose more about how its businesses promote diversity and address climate risks, and install an independent chairman to replace Buffett in that role. read more
Buffett has run Berkshire since 1965, and Mario Gabelli, chairman of Gamco Advisors and a prominent Berkshire investor, opposed ending his chairmanship.
“It’s not inappropriate for companies to look at separating the chair and CEO,” he said. “It doesn’t make sense in the case of Berkshire Hathaway because this guy has done a fantastic job for 50 years. We like the idea, but not here.”
Thousands of people massed outside the downtown arena housing the meeting before doors opened at 7 a.m. (1200 GMT).
Berkshire had projected lower attendance than in 2019, and about 10% to 15% of seats in the normally-full arena were empty.
As at other Berkshire-sponsored events this weekend, nearly all attendees did not wear masks, though all needed proof of COVID-19 vaccination. CNBC.com webcast the meeting.
“I bought a chair from Walmart so I could sit down,” said Tom Spain, founder of Henry Spain Investment Services in Market Harborough, England, who arrived at 3:15 a.m. for his third meeting. “Everyone has been using it. Next year I might bring a massive container of coffee and give it out.”
Lauritz Fenselau, a 23-year-old owner of a software startup from Frankfurt, Germany, showed up at 4 a.m. for his first meeting. “It’s like a pilgrimage,” he said.
Also sleep-deprived was Andres Avila, who arrived in Omaha from Boston just five hours before getting in line at 4:45 a.m., carrying an umbrella to fend off the rain.
“I have a bunch of my idols here,” he said.
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Reporting by Jonathan Stempel and Carolina Mandl in Omaha, Nebraska; editing by Megan Davies, Ros Russell and Diane Craft
Our Standards: The Thomson Reuters Trust Principles.
Berkshire Hathaway Chairman Warren Buffett walks through the exhibit hall as shareholders gather to hear from the billionaire investor at Berkshire Hathaway Inc’s annual shareholder meeting in Omaha, Nebraska, U.S., May 4, 2019. REUTERS/Scott Morgan
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NEW YORK, March 21 (Reuters) – Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) has struck an agreement to buy insurance company Alleghany Corp (Y.N) for $11.6 billion, just weeks after the 91-year-old billionaire bemoaned a lack of good investment opportunities.
Alleghany, whose businesses include reinsurer Transatlantic Holdings, would expand Berkshire’s large portfolio of insurers, which includes auto insurer Geico, reinsurer General Re and a unit that insures against major catastrophes and unusual risks.
“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” Buffett, who has run Berkshire since 1965, said in a statement.
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The acquisition, one of the five largest in Berkshire’s history, would reunite Buffett with Joseph Brandon, who led General Re from 2001 to 2008 and became Alleghany’s chief executive in December.
It would also end Buffett’s six-year drought of large acquisitions, and help him deploy some of the $146.7 billion of cash and equivalents his Omaha, Nebraska-based conglomerate had at year end.
Buffett lamented in his Feb. 26 annual shareholder letter that “internal opportunities deliver far better returns than acquisitions,” and that little “excites us” in equity markets. read more He pledged to keep $30 billion of cash on hand.
Berkshire agreed to pay $848.02 in cash per Alleghany share, a 25% premium over Friday’s closing price.
Alleghany has a 25-day “go-shop” period to find a better offer. Berkshire does not get involved in bidding wars.
The transaction is expected to close in the fourth quarter pending regulatory and Alleghany shareholder approvals. Alleghany would operate as an independent Berkshire unit.
Berkshire “epitomizes our long-term management philosophy,” Brandon said in a statement.
Insurance typically generates more than 20% of operating profit at Berkshire, whose dozens of businesses also include the BNSF railroad, Berkshire Hathaway Energy and Dairy Queen ice cream.
Berkshire also invests hundreds of billions of dollars in stocks such as Apple Inc (AAPL.O), and has this year invested more than $6.4 billion in Occidental Petroleum Corp . read more
New York-based Alleghany was founded in 1929 by railroad entrepreneurs Oris and Mantis Van Sweringen.
It was transformed into an insurance and investment operating company under Fred Morgan Kirby II’s leadership from 1967 to 1992.
Alleghany is sometimes thought of as a mini-Berkshire, and Buffett said the companies had “many similarities.”
Other Alleghany units include RSUI Group, an underwriter of wholesale specialty insurance, and CapSpecialty, a specialty insurer.
Goldman Sachs and law firm Willkie Farr & Gallagher advised Alleghany on the transaction. Law firm Munger, Tolles & Olson advised Berkshire.
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Reporting by Noor Zainab Hussain in Bengaluru and Jonathan Stempel in New York Additional reporting by Mehnaz Yasmin in Bengaluru
Editing by Saumyadeb Chakrabarty and Mark Potter
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FTSE Russell ejects four UK-listed, Russia-focused stocks
FRANKFURT/LONDON/ZURICH, March 14 (Reuters) – Allianz (ALVG.DE) and Swiss Re (SRENH.S) said on Monday they were cutting back on Russian business as European financial institutions turn their backs on Russia.
The German insurer and Swiss reinsurer join banks Deutsche (DBKGn.DE), Goldman Sachs (GS.N) and JPMorgan Chase (JPM.N) which have exited Russia following its Feb. 24 invasion of Ukraine and subsequent Western government sanctions.
The moves will pile pressure on others to follow.
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Allianz said it had put a stop to insuring new business in Russia and was no longer investing in Russia for its own portfolio. read more
Swiss Re said it was not taking on new business with Russian and Belarusian clients and was not renewing existing business with Russian clients. In a statement sent via email, Swiss Re said it was reviewing its current business relationships in Russia and Belarus. read more
The decisions follow similar action by other major European insurers and reinsurers, which provide cover for large projects such as energy installations.
Insurer Zurich (ZURN.S) no longer takes on new domestic customers in Russia and will not renew existing local business, a spokesperson told Reuters on Monday.
Hannover Re (HNRGn.DE) said last week that new business and renewals for customers in Russia and Belarus were on hold, while Italian insurer Generali (GASI.MI) said earlier this month it would pull out of Russia. read more
Insurance broker Willis Towers Watson (WTY.F) also said on Sunday it would withdraw from Russia, following similar moves by rivals Marsh (MMC.N) and Aon (AON.N).
Asset managers have said they will not make new investments in Russia and many Russian-focused funds have frozen because they are unable to trade following the sanctions and counter-measures taken by Russia. read more
The European Union’s markets watchdog ESMA said on Monday it was coordinating the bloc’s regulatory response to the Ukraine conflict to ensure markets continued to function in an orderly manner.
Britain’s pensions regulator said the sector had little direct exposure to Russia, but that there were practical difficulties in selling Russian assets. read more
Ukraine said on Monday it had begun “hard” talks with Russia on a ceasefire, immediate withdrawal of troops and security guarantees after both sides reported rare progress in negotiations at the weekend, despite Russian bombardments. read more
Russia calls its actions in Ukraine a “special operation”.
WINDING DOWN
Deutsche, which had faced stinging criticism from some investors and politicians for its ongoing ties to Russia, announced late on Friday that it would wind down its business there. read more
It was a surprise reversal by the Frankfurt-based lender, which had previously argued that it needed to support multinational firms doing business in Russia.
Britain’s London Stock Exchange Group also said late on Friday it was suspending all products and services for all customers in Russia, days after suspending the distribution of news and commentary in the country following new laws in Moscow. read more
Index provider FTSE Russell said on Monday it would delete four UK-listed, Russia-focused companies including Roman Abramovich’s Evraz (EVRE.L) after many brokers refused to trade their shares.
Evraz, along with Polymetal International (POLYP.L), Petropavlovsk (POG.L) and Raven Property Group (RAV.L), would be deleted from all FTSE’s indexes during the March review, it said in a statement.
FTSE Russell said it had received feedback from its External Advisory Committees and market participants that trading in the shares was “severely restricted” as brokers refused to handle the securities, hitting market liquidity. read more
JPMorgan says the majority of forecast risk for European banks from the Russia shock will come from commodity and economic spillover effects, with the sector plunging since the end of February.
European banking stocks (.SX7P) have come off their lows in recent days, however, and rose 3.8% on Monday.
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Additional reporting by Marc Jones, Iain Withers and Joao Manuel Mauricio, Writing by Carolyn Cohn, Editing by Catherine Evans
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LONDON, March 4 (Reuters) – Russia’s global financial isolation intensified on Friday as the London Stock Exchange (LSE) suspended trading in its last Russian securities and some insurers withdrew cover from exporters over Moscow’s invasion of Ukraine.
Banks, investors and insurers have in recent days ratcheted up that pressure by exiting investments in Russia and halting the provision of their services.
The LSE said it had suspended global depositary receipts (GDRs), which represent shares in a foreign company, for eight Russian companies, including Magnit and Sistema, after freezing trading in 28 firms on Thursday. read more
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The trading halts come as Britain, the European Union and the United States continue to roll out financial sanctions on Russia to prevent its companies from accessing Western markets.
In another turning of the screws on Moscow, trade credit insurers, who provide a financial safety net for exports and imports, are pulling back from covering businesses exporting to Ukraine and Russia given the risks of sanctions, high claims or missed payments, industry sources said. read more
The move in the nearly $3 trillion global market will heap further pressure on Russia’s already teetering economy.
“In this last week, trade credit insurers will have paused supporting new risk for Ukraine and Russia,” said Nick Robson, global leader for credit specialties at insurance broker Marsh.
European Union officials are also examining curbing Russia’s influence and access to finance at the International Monetary Fund following the invasion, six officials told Reuters. L2N2V71XO
“For its part, Washington will continue to embrace multilateral sanctions, [and] target the wealth of Russian oligarchs as part of a pressure campaign,” Isaac Boltansky, policy director for brokerage BTIG wrote in a note on Friday.
INVESTORS OUT
British insurer and asset manager Royal London became the latest Western investor to say it will sell its Russian assets as soon as possible, after a rush of similar announcements in recent days.
“We can’t trade these things anyway, but as soon as we can, we obviously intend to divest,” Royal London Chief Executive Barry O’Dwyer told Reuters. read more
The CEO of another major British investment group, Schroders, said on Thursday Russian stocks and bonds are now “in the realms of utterly uninvestable”. read more
Swiss wealth manager Julius Baer (BAER.S) has halted new business with wealthy Russians, two sources familiar with the bank’s operations told Reuters. read more
Some investors are however piling into funds linked to Russia, seeing current distressed levels as a potentially cheap entry point for Russian assets. read more
Deutsche Bank (DBKGn.DE) said it has been stress-testing its operations in Russia, where it employs some 1,500 workers in a major technology centre, as banks with a significant Russian presence grapple with the ramifications of its growing financial isolation.
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Reporting by Carolyn Cohn and Lawrence White, additional reporting by Michelle Price, Tom Sims and Frank Siebelt in Frankfurt, editing by Alexander Smith, Jonathan Oatis and David Gregorio
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An employee poses for a picture while demonstrating a payment card at a branch of VTB bank in Moscow, Russia May 30, 2019. REUTERS/Evgenia Novozhenina
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FRANKFURT, March 3 (Reuters) – Regulators are preparing for a possible closure of the European arm of Russia’s second-largest bank, VTB Bank (VTBR.MM), amid growing concerns about the impact of Western sanctions on the bank following the Ukraine invasion, according to two sources familiar with the matter.
VTB Bank’s European operations could be closed within days by regulators in Germany, where it chiefly operates on the continent, one person with direct knowledge of the situation said.
The second source said BaFin, the German regulator, was on “high alert”, monitoring the situation closely and ready to act if needed although no final decision had been taken.
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VTB, which did not respond to a Reuters’ request for comment, said on its European website on Thursday that it was in close consultation with BaFin. It said that the bank was stable and fully operational.
The Russian finance ministry in Moscow and officials at the embassy in Berlin did not respond to requests for comment about VTB’s European division.
BaFin declined to comment.
The London Stock Exchange Group’s clearing arm LCH said on Thursday it had placed VTB Capital, the trading division of VTB Bank, in default as a clearing member. read more
Last Friday, the exchange had suspended VTB Capital’s membership, meaning it could no longer buy and sell stocks listed on the platform.
A spokesperson for the Bundesbank, which shares responsibility for bank supervision, declined to comment on a specific bank when asked about Russian banks in Germany but said it was in close contact with BaFin in this regard. “If necessary, we will take the appropriate measures,” the spokesperson added.
Should regulators decide to close VTB in Europe, it would mark the second failure of a major Russian bank in the region as sanctions from the West squeeze the country’s lenders. Most of the European operations of Sberbank, Russia’s largest bank, closed earlier this week. read more
VTB, which has more than 4 billion euros of deposits in Europe, principally in Germany, would be covered by Berlin’s deposit protection scheme, which shields savers with up to 100,000 euros.
BaFin has said that VTB will not take on new customers and that existing account holders were able to access their money.
Supervisors, however, have been monitoring an outflow of deposits since Russia invaded Ukraine, one source familiar with the situation said. The person added that sanctions made it difficult for the bank to recapitalise to meet demands.
VTB has become one of the principal targets of economic sanctions against Moscow in recent days in the aftermath of Russia’s invasion of Ukraine. read more
On Wednesday, it was excluded from the SWIFT messaging system underpinning global transactions.
That followed U.S. sanctions last week that effectively kicked the bank out of the U.S. financial system, banned trade with Americans and froze its U.S. assets.
One European Union official, asking not to be named, said VTB was in a similar position to Sberbank because both were sanctioned and had been reputationally damaged in Europe.
VTB had roughly 8 billion euros of assets in Europe, according to its most recent quarterly statements. Its European customers include 600 companies, 150 financial institutions from Russia and 160,000 private customers, according to its website.
In recent years, ordinary Germans and local governments have also parked their money with VTB in part because it was one of a handful of banks that did not charge negative interest rates.
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Additional reporting by Frank Siebelt in Frankfurt and Jan Strupczewski in Brussels; Editing by Paritosh Bansal, Edward Tobin and Jane Merriman
Our Standards: The Thomson Reuters Trust Principles.
FRANKFURT/LONDON, March 2 (Reuters) – European bank shares halted their slide on Wednesday after dropping to their lowest level in nearly 11-months on fallout from the Ukraine crisis, which has forced the European arm of Russia’s Sberbank (SBER.MM) to close.
Russia has shown no intention of stopping its Ukraine attack, which has triggered heavy sanctions against Moscow and led to an exodus of big companies from the Russian market. read more
U.S. President Joe Biden has warned Vladimir Putin that the Russian leader “has no idea what’s coming”. Russia calls its Ukraine actions a “special operation”. read more
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The European arm of Sberbank, Russia’s biggest lender, has been closed by order of the European Central Bank. read more
Regulators are also preparing for a possible closure of the European arm of Russia’s second-largest bank, VTB Bank (VTBR.MM), amid growing concerns about the impact of sanctions, Reuters reported on Wednesday. read more .
Sberbank, which reported record profits in 2021, said it was leaving the European market as its subsidiaries there faced large cash outflows and threats to the safety of employees and property. read more
Sberbank operated in Austria, Croatia, Germany and Hungary, among other countries, and had European assets worth 13 billion euros ($14.41 billion) on Dec. 31, 2020.
Sberbank’s depository receipts in London have plunged 99.9% so far in 2022. “All sellers no buyers,” said one London trader on Wednesday.
The impact of the crisis and the sanctions are expected to have repercussions for European banks.
“Large western European banks’ asset quality will be pressured by the fallout from Russia’s invasion of Ukraine,” the credit rating agency Fitch said on Wednesday.
“The banks also face materially increased operational risk,” it added.
An index of leading European bank stocks (.SX7P) was up 0.1%by midday Wednesday, erasing early losses that came on top of a 5.6% drop on Tuesday and 4.5% on Monday. Earlier on Wednesday, the index hit its lowest level since April 2021, down 27% from last month’s highs.
Austria’s Raiffeisen Bank International (RBIV.VI), which has operated in Russia since the collapse of the Soviet Union thirty years ago, has been one of the biggest fallers so far this week.
The bank is looking into leaving Russia, two people with knowledge of the matter told Reuters, a move that would make it the first European bank to do so since Moscow’s Ukraine invasion. read more
The logo of Raiffeisen Bank on top of a building is seen behind a statue of Soviet state founder Vladimir Leninin Moscow, Russia, June 14, 2016. REUTERS/Maxim Shemetov
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Raiffeisen shares, which are half the value of a month ago, were down 4.7%.
Some finance officials are trying to reassure markets.
The capital position of Hungary’s OTP Bank , central Europe’s largest independent lender, is excellent and the bank can withstand further possible market shocks in Russia and Ukraine, Hungary’s central bank said in an emailed reply to Reuters. read more
SHEDDING ASSETS
Germany’s market regulator BaFin is closely monitoring the European arm of Russia’s VTB Bank (VTBR.MM), which was no longer accepting new clients. The bank, headquartered in Frankfurt, had 8.1 billion euros of assets at the end of 2020.
On Tuesday, Russia said it was placing temporary restrictions on foreigners seeking to exit Russia assets, as it tried to stem an investor retreat driven by crippling Western sanctions.
But investors are continuing to shed assets. Aviva’s (AV.L) fund management business will divest its small exposure to Russia “as soon as we practically can,” chief executive Amanda Blanc said on Wednesday.
Financial companies are scrambling to keep up with the situation.
Dubai’s Mashreqbank (MASB.DU) has stopped lending to Russian banks and is reviewing its existing exposure to the country, two sources familiar with the matter told Reuters. read more
The move is one of the first reported instances of a bank in the Middle East halting ties to Russia and underscores growing global nervousness about falling foul of Western sanctions.
France’s BNP Paribas (BNPP.PA) said it was working to maintain its activities as much as possible at its Ukraine arm Ukrsibbank, which has close to 5,000 employees.
A task force at Germany’s Commerzbank, which has a subsidiary in Russia, is meeting multiple times a day, a board member has said.
Aki Hussain, CEO of Hiscox (HSX.L), said the Lloyd’s of London insurer provided cover for international businesses in Ukraine.
“We insure those offices and some of the people there and we’ve been working closely with our clients for the last eight weeks and effectively – to the extent they want – we’ve been helping them leave the country and evacuate their staff.”
($1 = 0.9022 euros)
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Additional reporting by Gergely Szakacs, Zuzanna Szymanska, Saeed Azhar and Yousef Saba
Editing by Paul Carrel, Tomasz Janowski and Jane Merriman
Our Standards: The Thomson Reuters Trust Principles.