Swiss Bank’s Russian Customers ‘Sky-high Deposits far Outweigh Credit Risk

According to foreign media reports on March 17, Switzerland banks held up $213 billion of Russian clients’ money, is far more than the on-balance sheet risk exposure assessed by several financial firms. This provides more confidence in effectively sanctioning Russia through financial means.

The Swiss Bankers Association (SBA) estimated that the banks hold between 150 billion and 200 billion Swiss Francs ($213 billion) of Russian client money in offshore accounts. The initial worry of sanctions against Russia could face credit risk seems redundant. Switzerland’s two largest banks detailed “limited” exposure to Russia last week, the largest UBS saying $634 million direct exposure had cut since the end of the year. Credit Suisse CEO Thomas said about 4 percent of the assets managed by Switzerland’s second-largest bank for wealthy clients belong to Russians, amounting to tens of billions of dollars. It is far greater than the 848 million Swiss francs net in Credit Suisse’s annual report.

SBA disclosure is rare for Switzerland. Since Russia’s invasion of Ukraine last month, Switzerland took the unusual step of agreeing to drop its neutrality stance and apply European Union financial sanctions on Russia. As the growing list of sanctions, banks found Russian client’s funds under scrutiny far beyond the loans they have granted, or businesses done of Russian subsidiaries that could have resulted in balance sheet losses. UBS CEO Ralph Hamers said that UBS is not only seeking protection for current compliance, but also avoiding risks from possible penalties in the future.