‘For Practical Purposes, That Isn’t an Option’: Deutsche Bank Defends Decision Not to Exit Russia

Deutsche Bank on Thursday defended its decision not to cease its operations in Russia in the wake of its invasion of Ukraine, stating that it is “not practical” to do so.

Speaking to CNBC, the German bank’s chief financial officer James von Moltke said exiting the country would “not be the right thing to do” with regards to its clients that still operate in Russia.

The CEO did not specifically name any of the bank’s clients in Russia.

“We’re there to support our clients. And so, for practical purposes, that isn’t an option that’s available to us. Nor would it be the right thing to do in terms of managing those client relationships and helping them to manage their situation,” Moltke said.

However, Moltke acknowledged that the bank would monitor the situation going forward and would reconsider its current stance if the political situation between Ukraine and Russia were to further escalate, prompting its clients in the latter country to exit.

“Of course, we’ll need to look at how this situation evolves and consider our footprint in Russia as we gain some greater clarity as to the direction of travel here,” he said. “As that [client presence] diminishes, so too will our presence in Moscow.”

The bank previously on Wednesday said that its exposure to Russia was “very limited” and had been since 2014, along with further reductions in its “local footprint” in recent weeks.

“Our direct exposures are currently very limited and tightly managed. Second- and third-order effects of the current situation, including sanctions and cybersecurity risk, are being carefully evaluated and monitored,” said Stuart Lewis, Chief Risk Officer and Member of the Management Board.

Deutsche Bank operates in a string of countries around the globe and serves both local and international clients in Russia.

However, the German lender said that credit exposures to both Russia and Ukraine make up for a very small portion of its overall loan portfolio and are protected by a number of risk mitigants.

As of Dec. 31, 2021, Deutsche’s net loan exposure to Russia stood at .6 billion euros ($660 million) after taking account of guarantees and asset collateral while its gross loan exposure was 1.4 billion euros ($1.54 billion), about 0.3 percent of its overall loan book.

Meanwhile, its net loan exposure to Ukraine was 42 million euros ($46 million) as of Dec. 31.

“In respect of market risk exposure, at the time of Russia’s invasion of Ukraine, Deutsche Bank’s Russia/Ukraine market risk exposure was well contained and the bank had a modest defensive position,” the bank said.

Von Moltke told CNBC that the bank had managed the market risk “quite successfully” in the early days of Russia’s invasion of Ukraine to get it “under control” and was working closely with its clients to manage their reaction to the situation.

Elsewhere, the bank’s $200 million capital in its Moscow subsidiary had been “fully hedged from a currency perspective,” Moltke said, adding that Ukraine has continued to operate its bank which he said was “pretty incredible under the circumstances.”

Deutsche Bank in 2015 pulled back on its investment in Russia amid an investigation into potential money laundering by Russian clients.

Moltke’s comments come after Goldman Sachs became one of the first major global investment banks to leave Russia in the wake of its invasion of Ukraine.

A bank spokesperson told CNBC in a statement that it is “winding down its business in Russia in compliance with regulatory and licensing requirements” and is “focused on supporting our clients across the globe in managing or closing out pre-existing obligations in the market and ensuring the well-being of our people.”

America’s largest bank, JPMorgan Chase, made a similar announcement saying it was “actively unwinding” its Russian business, citing “compliance with directives by governments around the world.”

“Current activities are limited, including helping global clients address and close out pre-existing obligations; managing their Russian-related risk; acting as a custodian to our clients; and taking care of our employees,” the bank said.

The Epoch Times has contacted Goldman Sachs and JPMorgan Chase for comment.

From The Epoch Times