UAE EXCLUSIVE Mashreqbank suspends Russian bank lending due to credit issues – sources

A view of the downtown skyline is seen from the Museum of the Future in Dubai, United Arab Emirates, February 23, 2022. REUTERS/Christopher Pike/File Photo

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DUBAI, March 2 (Reuters) – Dubai’s Mashreqbank (MASB.DU) has stopped lending to Russian banks and is reviewing its current exposure to the country amid heightened risks following Moscow’s invasion of Ukraine, officials said. to Reuters two sources familiar with the matter. .

The move is one of the first reported cases of a bank in the Middle East ending its ties with Russia and underscores growing global nervousness about falling foul of Western sanctions.

Mashreqbank declined to comment on the move, which comes as banks around the world sever ties with Russian lenders after a series of new sanctions announced by the United States, Britain, the European Union and Canada. in particular the blocking of access to the SWIFT international payment system. for some banks.

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Russian financial institutions (FIs) were part of the emerging markets loan portfolio that Mashreqbank had been building in recent years to expand beyond the Middle East, the sources said.

The exposure was mainly short-term or one-year loans to banks, one of the sources added.

Mashreqbank’s actions indicate that emerging market banks are also getting nervous about their exposure to Russia and the potential risk of secondary sanctions, bankers said.

Last year, Mashreqbank agreed to pay $100 million in fines to resolve a US government investigation into sanctions violations against trade with Sudan.

Mashreqbank’s decision to stop lending to Russian FIs was not due to a directive from the Central Bank of the United Arab Emirates (CBUAE), but was aimed at mitigating risk from its exposure to Russia, the sources said.

NEUTRAL POSITION

A sharp decline in the Russian ruble and the downgrading of Russia’s rating by rating agencies were also of concern as it affects the credit quality of Russian banks, they added.

Ratings agency S&P downgraded Russia’s long-term foreign currency credit rating to ‘BB+’ from ‘BBB-‘, and warned it could downgrade further, after gaining more clarity on the macroeconomic repercussions of the sanctions.

Russia’s central bank has bolstered its banking sector with billions of additional currency and ruble liquidity, while the government has separately pledged large-scale support for sanctioned businesses. Read more

The CBUAE, when asked for comment, directed Reuters to the targeted financial sanctions page on its website and referred questions to the executive office of the Committee on Goods and Materials Subject to Import and Export Controls, which Reuters could not immediately reach for comment.

The bankers said the UAE central bank has so far not issued any guidelines on doing business with Russian companies or exposure.

Arab Gulf states, including the United Arab Emirates, have taken a neutral stance between Western allies and Russia, with which they are partners as part of a grouping of oil producers known as OPEC+.

UAE public funds such as Mubadala have invested in Russian companies and have strategic links with Russia’s sovereign wealth fund, the Russian Direct Investment Fund (RDIF).

Mubadala declined to say whether he was taking any action regarding the Russian exhibit. He has invested $3 billion in Russia in about 50 companies, according to his website.

Abu Dhabi Investment Authority, the largest sovereign wealth fund in the United Arab Emirates, also declined to comment on its exposure to Russia.

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Reporting by Saeed Azhar and Yousef Saba, editing by Louise Heavens; Editing by Alexander Smith

Our standards: The Thomson Reuters Trust Principles.

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