UBS has disclosed that it has $10 million in outstanding loans from clients affected by Western sanctions imposed in response to Russia’s invasion of Ukraine.
The Swiss lender also announced in its annual report on Monday morning that it had around $200 million of exposure to Russian assets used as collateral in Lombard loans, which are loans secured by a portfolio of liquid assets like stocks. and bonds, and other secured financing.
The world’s largest wealth manager said its direct risk exposure to Russia was $634 million at the end of 2021, out of its total exposure to emerging markets of $20.9 billion.
By comparison, Austria’s Raiffeisen reported direct exposure to Russia of 22.9 billion euros ($24.9 billion), while Societe Generale and France’s Credit Agricole reported 18.6 billion respectively. ‘ and 4.9 billion euros of exposure, and ING of the Netherlands declared 6.7 billion euros.
Russian oligarchs have long favored Swiss wealth managers due to the country’s stability and secrecy laws. Russian wealth accounts for around 1% of annual foreign direct investment in Switzerland.
But the Swiss government’s decision last month to break its tradition of political neutrality and match EU sanctions has made the country’s banks much less attractive to the oligarchs.
“We are working to implement the sanctions imposed by Switzerland, the US, the EU, the UK and others – all of which have announced unprecedented levels of sanctions against Russia and certain entities and Russian nationals,” UBS said.
Western banks have steadily scaled back business in Russia over the past eight years following the country’s annexation of Crimea, but those that have maintained significant operations in the country have been hit hard in recent weeks.
Western sanctions have suffocated the Russian economy, causing the value of the ruble to fall and interest rates to jolt.
Asset freezes imposed by Western allies on several Russian banks, seven of which are to be cut from the Swift global payment messaging system this week, have also affected global banks that transact with them.
“UBS is also currently monitoring settlement risk on certain open transactions with Russian banks and non-bank counterparties or Russian underlyings, as market closures, the imposition of exchange controls, sanctions or other measures may limit our ability to settle existing transactions or realize on collateral, which may result in unexpected increases in exposures,” the bank said.
UBS added that it held $51 million in assets in its Russian subsidiary.
Separately, the group revealed that executives suffered a 1% drop in bonuses for the year due to the bank’s $861 million loss in the collapse of family office Archegos Capital, which was a prime brokerage client.
The overall bonus pool increased by 10% after a banner year in investment banking and wealth management, but was also reduced due to the loss of Archegos.
“Compensation has been reduced by an amount equivalent to more than half of the after-tax loss,” the bank said. “This reduction has had a direct impact on the remuneration of commercial and control functions, as well as that of the general management of the group.”