International sanctions imposed on Russia’s financial system and companies in the wake of its attack on Ukraine are likely to have implications for foreign banking systems. The spillovers could occur through several channels: (1) foreign banks with operations in Russia; (2) Russian banks operating in the foreign country; (3) foreign banks’ cross-border lending to Russian non-financial corporations; (4) foreign banks’ cross-border borrowing from Russian entities; and (5) foreign banks with financial interconnections to international banks that have exposures to Russia. This note analyzes how those sanctions could affect financial stability in the ASEAN+3 region through the identified channels, by attempting to quantify the potential impact on individual banks and economies, and the region as a whole.
Analytical Notes